Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70121
Authors: 
Finter, Philipp
Niessen-Ruenzi, Alexandra
Ruenzi, Stefan
Year of Publication: 
2011
Series/Report no.: 
CFR Working Paper 10-03 [rev.]
Abstract: 
This paper develops a broad-based sentiment indicator for Germany and investigates whether investor sentiment can explain stock returns on the German stock market. Based on a principal component analysis, we construct a sentiment indicator that condenses information of several well-known sentiment proxies. We show that this indicator explains the return spread between sentiment sensitive stocks and stocks that are not sensitive to sentiment fluctuations. Specifically, stocks that are difficult to arbitrage and hard to value are sensitive to the indicator. However, we do not find much predictive power of sentiment for future stock returns.
Subjects: 
investor sentiment
stock returns
German stock market
JEL: 
G12
G14
Document Type: 
Working Paper

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