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Optimism in Financial Markets: Stock Market Returns and Investor Sentiments

1
Faculty of Economics and Management, Free University of Bozen-Bolzano, 39100 Bolzano, Italy
2
Sparkasse—Cassa di Risparmio, 39100 Bolzano, Italy
3
Centre for Applied Macro and Commodity Prices, BI Norwegian Business School, 0484 Oslo, Norway
*
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2019, 12(2), 85; https://doi.org/10.3390/jrfm12020085
Received: 8 April 2019 / Revised: 30 April 2019 / Accepted: 7 May 2019 / Published: 13 May 2019
(This article belongs to the Special Issue Bayesian Econometrics)
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Abstract

This paper investigates how investor sentiment affects stock market returns and evaluates the predictability power of sentiment indices on U.S. and EU stock market returns. As regards the American example, evidence shows that investor sentiment indices have an economic and statistical predictability power on stock market returns. Concerning the European market instead, investigation provides weak results. Moreover, comparing the two markets, where investor sentiment of U.S. market tries to predict the European stock market returns, and vice versa, the analyses indicate a spillover effect from the U.S. to Europe. View Full-Text
Keywords: Bayesian econometrics; portfolio choice; sentiments; stock market predictability Bayesian econometrics; portfolio choice; sentiments; stock market predictability
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Limongi Concetto, C.; Ravazzolo, F. Optimism in Financial Markets: Stock Market Returns and Investor Sentiments. J. Risk Financial Manag. 2019, 12, 85.

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