The impact of investor sentiment on the German stock market |
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Authors: | Philipp Finter Alexandra Niessen-Ruenzi Stefan Ruenzi |
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Institution: | 1.Sal. Oppenheim jr. & Cie. AG & Co. KGaA,K?ln,Deutschland;2.Universit?t Mannheim,Mannheim,Deutschland |
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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. |
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Keywords: | |
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