Managerial Sentiment, Consumer Confidence and Sector Returns

Ahmed Fouad Saleh Salhin, Mohamed Sherif, Edward Jones

Research output: Contribution to journalArticle

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.
LanguageEnglish
Pages24–38
Number of pages15
JournalInternational Review of Financial Analysis
Volume47
Early online date2 Jul 2016
DOIs
StatePublished - Oct 2016

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Consumer confidence
Sentiment
Stock returns
Consumer sentiment
Manufacturing firms
Industry characteristics
European Commission
Confidence
Grouping
Predictors

Cite this

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Managerial Sentiment, Consumer Confidence and Sector Returns. / Salhin, Ahmed Fouad Saleh; Sherif, Mohamed; Jones, Edward.

In: International Review of Financial Analysis, Vol. 47, 10.2016, p. 24–38.

Research output: Contribution to journalArticle

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