Abstract
This paper investigates the relationship between managerial sentiment and sector returns. Using UK monthly data from January 1985 to December 2014 and a sample of consumer and business confidence indicators provided by the European Commission, we provide novel evidence on how managerial and consumer sentiment indicators affect stock returns. We find no support for consumer confidence as a predictor of stock returns. However, managerial sentiment shows a significant impact on aggregate market and sector return indices. Furthermore, we find that parameter estimates for sector groupings are not consistent, implying that the sentiment-return relationship differs across sectors. We also find parameters are sensitive to industry characteristics. Importantly, the overall sentiment-return relationship is dominated by sentiment associated with manufacturing firms.
Original language | English |
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Pages (from-to) | 24–38 |
Number of pages | 15 |
Journal | International Review of Financial Analysis |
Volume | 47 |
Early online date | 2 Jul 2016 |
DOIs | |
Publication status | Published - Oct 2016 |
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Edward Jones
- School of Social Sciences, Edinburgh Business School - Associate Professor
- School of Social Sciences - Associate Professor
Person: Academic (Research & Teaching)