Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/27216
Authors: 
Schmeling, Maik
Year of Publication: 
2008
Series/Report no.: 
Discussion papers // School of Economics and Management of the Hanover Leibniz University 407
Abstract: 
We examine whether consumer confidence - as a proxy for individual investor sentiment - affects expected stock returns internationally in 18 industrialized countries. In line with recent evidence for the U.S., we find that sentiment negatively forecasts aggregate stock market returns on average across countries. When sentiment is high, future stock returns tend to be lower and vice versa. This relation also holds for returns of value stocks, growth stocks, small stocks, and for different forecasting horizons. Finally, we employ a cross-sectional perspective and provide evidence that the impact of sentiment on stock returns is higher for countries which have less market integrity and which are culturally more prone to herd-like behavior and overreaction.
Subjects: 
Consumer confidence
growth stocks
investor sentiment
noise trader
predictive regressions
value stocks
JEL: 
G12
G14
G15
Document Type: 
Working Paper

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