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Int. J. Financial Stud. 2015, 3(3), 319-341; doi:10.3390/ijfs3030319

Forecasting Returns with Fundamentals-Removed Investor Sentiment

DeGroote School of Business, McMaster University, Hamilton, ON L8S 4M4, Canada
Academic Editor: Nicholas Apergis
Received: 23 May 2015 / Revised: 9 July 2015 / Accepted: 13 July 2015 / Published: 27 July 2015
View Full-Text   |   Download PDF [633 KB, uploaded 28 July 2015]   |  


The Baker and Wurgler (2006) sentiment index purports to measure irrational investor sentiment, while the University of Michigan Consumer Sentiment Index is designed to largely reflect fundamentals. Removing this fundamental component from the Baker and Wurgler index creates an index of investor sentiment that may better capture irrational sentiment. This new index predicts returns better than the original Baker and Wurgler index as well as the alternative Baker and Wurgler sentiment index. View Full-Text
Keywords: investor sentiment; return predictability; stock market; consumer confidence investor sentiment; return predictability; stock market; consumer confidence

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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Stivers, A. Forecasting Returns with Fundamentals-Removed Investor Sentiment. Int. J. Financial Stud. 2015, 3, 319-341.

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