IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v45y2013i3p1233-1249.html
   My bibliography  Save this article

Published stock recommendations as investor sentiment in the near-term stock market

Author

Listed:
  • Nico Singer
  • Saskia Laser
  • Frank Dreher

Abstract

This paper investigates the role of published stock recommendations in print and online media as investor sentiment in the near-term German stock market. In line with extant literature on other sentiment measures, vector autoregressions reveal that past stock returns drive today’s sentiment, but not the other way around, and that sentiment is a powerful predictor of itself. In particular, sentiment based on printed analyst recommendations follows reversals, that is, when analysts face a stock market downturn, they see a buying opportunity and become optimistic. Copyright Springer-Verlag Berlin Heidelberg 2013

Suggested Citation

  • Nico Singer & Saskia Laser & Frank Dreher, 2013. "Published stock recommendations as investor sentiment in the near-term stock market," Empirical Economics, Springer, vol. 45(3), pages 1233-1249, December.
    • Handle: RePEc:spr:empeco:v:45:y:2013:i:3:p:1233-1249
    DOI: 10.1007/s00181-012-0649-2
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00181-012-0649-2
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s00181-012-0649-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jördis Hengelbrock & Erik Theissen & Christian Westheide, 2013. "Market Response to Investor Sentiment," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 40(7-8), pages 901-917, September.
    2. Kling, Gerhard & Gao, Lei, 2008. "Chinese institutional investors' sentiment," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(4), pages 374-387, October.
    3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    4. Schmeling, Maik, 2007. "Institutional and individual sentiment: Smart money and noise trader risk?," International Journal of Forecasting, Elsevier, vol. 23(1), pages 127-145.
    5. Finter, Philipp & Niessen-Ruenzi, Alexandra & Ruenzi, Stefan, 2010. "The impact of investor sentiment on the German stock market," CFR Working Papers 10-03, University of Cologne, Centre for Financial Research (CFR).
    6. Gregory W. Brown & Michael T. Cliff, 2005. "Investor Sentiment and Asset Valuation," The Journal of Business, University of Chicago Press, vol. 78(2), pages 405-440, March.
    7. Wang, Yaw-Huei & Keswani, Aneel & Taylor, Stephen J., 2006. "The relationships between sentiment, returns and volatility," International Journal of Forecasting, Elsevier, vol. 22(1), pages 109-123.
    8. Brown, Gregory W. & Cliff, Michael T., 2004. "Investor sentiment and the near-term stock market," Journal of Empirical Finance, Elsevier, vol. 11(1), pages 1-27, January.
    9. Paul C. Tetlock, 2007. "Giving Content to Investor Sentiment: The Role of Media in the Stock Market," Journal of Finance, American Finance Association, vol. 62(3), pages 1139-1168, June.
    10. Brad Barber & Reuven Lehavy & Maureen McNichols & Brett Trueman, 2001. "Can Investors Profit from the Prophets? Security Analyst Recommendations and Stock Returns," Journal of Finance, American Finance Association, vol. 56(2), pages 531-563, April.
    11. Thomas Lux, 2011. "Sentiment dynamics and stock returns: the case of the German stock market," Empirical Economics, Springer, vol. 41(3), pages 663-679, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shuhong Wang & Xiaojing Yi & Malin Song, 2023. "The interrelationship of air quality, investor sentiment, and stock market liquidity: a review of China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(10), pages 10955-10973, October.
    2. Dimpfl Thomas & Kleiman Vladislav, 2019. "Investor Pessimism and the German Stock Market: Exploring Google Search Queries," German Economic Review, De Gruyter, vol. 20(1), pages 1-28, February.
    3. Jinfang Li, 2021. "The term structure effects of individual stock investor sentiment on excess returns," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1695-1705, April.
    4. Shah, Syed Faisal & Albaity, Mohamed, 2022. "The role of trust, investor sentiment, and uncertainty on bank stock return performance: Evidence from the MENA region," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).
    5. Jawadi, Fredj & Namouri, Hela & Ftiti, Zied, 2018. "An analysis of the effect of investor sentiment in a heterogeneous switching transition model for G7 stock markets," Journal of Economic Dynamics and Control, Elsevier, vol. 91(C), pages 469-484.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Singer, Nico & Dreher, Frank & Laser, Saskia, 2012. "Published stock recommendations as institutional investor sentiment in the near-term stock market," Thuenen-Series of Applied Economic Theory 121, University of Rostock, Institute of Economics.
    2. Wang, Wenzhao & Duxbury, Darren, 2021. "Institutional investor sentiment and the mean-variance relationship: Global evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 415-441.
    3. Bormann, Sven-Kristjan, 2013. "Sentiment indices on financial markets: What do they measure?," Economics Discussion Papers 2013-58, Kiel Institute for the World Economy (IfW Kiel).
    4. Yamini Yadav & Pramod Kumar Naik, 2024. "Investors’ Irrational Sentiment and Stock Market Returns: A Quantile Regression Approach Using Indian Data," Business Perspectives and Research, , vol. 12(1), pages 45-64, January.
    5. Stefan Abrantes Costa & Pedro Manuel Nogueira Reis & Antonio Pedro Soares Pinto, 2020. "Subjective/ Behavioural Factors Influence the PSI 20 and IBEX 35," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 13-27, October.
    6. Tiwari, Aviral Kumar & Abakah, Emmanuel Joel Aikins & Bonsu, Christiana Osei & Karikari, Nana Kwasi & Hammoudeh, Shawkat, 2022. "The effects of public sentiments and feelings on stock market behavior: Evidence from Australia," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 443-472.
    7. Lutz, Chandler, 2015. "The impact of conventional and unconventional monetary policy on investor sentiment," Journal of Banking & Finance, Elsevier, vol. 61(C), pages 89-105.
    8. Junmao Chiu & Huimin Chung & Keng-Yu Ho, 2014. "Fear Sentiment, Liquidity, and Trading Behavior: Evidence from the Index ETF Market," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 17(03), pages 1-25.
    9. Lux, Thomas, 2012. "Estimation of an agent-based model of investor sentiment formation in financial markets," Journal of Economic Dynamics and Control, Elsevier, vol. 36(8), pages 1284-1302.
    10. Gric, Zuzana & Bajzík, Josef & Badura, Ondřej, 2023. "Does sentiment affect stock returns? A meta-analysis across survey-based measures," International Review of Financial Analysis, Elsevier, vol. 89(C).
    11. Dragos Stefan Oprea & Laura Brad, 2014. "Investor Sentiment and Stock Returns: Evidence from Romania," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 19-25, April.
    12. Rameeza Andleeb & Arshad Hassan, 2023. "Impact of Investor Sentiment on Contemporaneous and Future Equity Returns in Emerging Markets," SAGE Open, , vol. 13(3), pages 21582440231, August.
    13. Shah Saeed Hassan Chowdhury, 2023. "Spillover of Sentiments Between the GCC Stock Markets," Global Business Review, International Management Institute, vol. 24(6), pages 1434-1453, December.
    14. Lux, Thomas, 2008. "Sentiment dynamics and stock returns: the case of the German stock market," Kiel Working Papers 1470, Kiel Institute for the World Economy (IfW Kiel).
    15. repec:hur:ijaraf:v:4:y:2014:i:2:p:23-29 is not listed on IDEAS
    16. Han, Xing & Li, Youwei, 2017. "Can investor sentiment be a momentum time-series predictor? Evidence from China," Journal of Empirical Finance, Elsevier, vol. 42(C), pages 212-239.
    17. Ung, Sze Nie & Gebka, Bartosz & Anderson, Robert D.J., 2023. "Is sentiment the solution to the risk–return puzzle? A (cautionary) note," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    18. Dragos Stefan Oprea, 2014. "Does Investor Sentiment Matter in Post-Communist East European Stock Markets?," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(8), pages 356-366, August.
    19. Lux, Thomas, 2009. "Mass psychology in action: identification of social interaction effects in the German stock market," Kiel Working Papers 1514, Kiel Institute for the World Economy (IfW Kiel).
    20. Saumya Ranjan Dash & Jitendra Mahakud, 2013. "Investor Sentiment and Stock Return: Do Industries Matter?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 7(3), pages 315-349, August.
    21. Fang, Hao & Chung, Chien-Ping & Lu, Yang-Cheng & Lee, Yen-Hsien & Wang, Wen-Hao, 2021. "The impacts of investors' sentiments on stock returns using fintech approaches," International Review of Financial Analysis, Elsevier, vol. 77(C).

    More about this item

    Keywords

    Analyst forecasts; Investor sentiment; Media content; VAR analysis; G17; C22;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:45:y:2013:i:3:p:1233-1249. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.