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Investor Sentiment: An empirical study on Swedish Industries

Väljamets, Hugo LU and Sekkat, Malak LU (2016) NEKN02 20161
Department of Economics
Abstract
We decompose the monthly Swedish consumer confidence index into a rational part based on fundamentals and an irrational part based on exogenous, irrational beliefs. Subsequently, we investigate the impact of investor irrationality and its short-term predictability on industry returns in Sweden. In addition, we provide an explanation to the reason some industries are more prone to investor sentiment than others. We predict that young industries that are complex and characterised by risky projects, dependence on intangible assets, and that have high growth potential are more exposed to investor sentiment than mature and core-industries with stable cash flows. We provide evidence of a short-term predictability of investor sentiment on future... (More)
We decompose the monthly Swedish consumer confidence index into a rational part based on fundamentals and an irrational part based on exogenous, irrational beliefs. Subsequently, we investigate the impact of investor irrationality and its short-term predictability on industry returns in Sweden. In addition, we provide an explanation to the reason some industries are more prone to investor sentiment than others. We predict that young industries that are complex and characterised by risky projects, dependence on intangible assets, and that have high growth potential are more exposed to investor sentiment than mature and core-industries with stable cash flows. We provide evidence of a short-term predictability of investor sentiment on future industry returns on the Swedish stock market. Also, in line with our predictions, we find that small industries, that experience high growth, that are dependent on intangible assets, and have more volatile cash flows are more exposed to investor sentiment. However, we find that core-industry returns, contrary to the other industries, have a positive relationship with last period investor sentiment. (Less)
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author
Väljamets, Hugo LU and Sekkat, Malak LU
supervisor
organization
course
NEKN02 20161
year
type
H1 - Master's Degree (One Year)
subject
keywords
Investor sentiment, consumer confidence, industry returns, irrationality, Sweden
language
English
id
8878348
date added to LUP
2016-06-13 14:13:46
date last changed
2016-06-13 14:13:46
@misc{8878348,
  abstract     = {We decompose the monthly Swedish consumer confidence index into a rational part based on fundamentals and an irrational part based on exogenous, irrational beliefs. Subsequently, we investigate the impact of investor irrationality and its short-term predictability on industry returns in Sweden. In addition, we provide an explanation to the reason some industries are more prone to investor sentiment than others. We predict that young industries that are complex and characterised by risky projects, dependence on intangible assets, and that have high growth potential are more exposed to investor sentiment than mature and core-industries with stable cash flows. We provide evidence of a short-term predictability of investor sentiment on future industry returns on the Swedish stock market. Also, in line with our predictions, we find that small industries, that experience high growth, that are dependent on intangible assets, and have more volatile cash flows are more exposed to investor sentiment. However, we find that core-industry returns, contrary to the other industries, have a positive relationship with last period investor sentiment.},
  author       = {Väljamets, Hugo and Sekkat, Malak},
  keyword      = {Investor sentiment,consumer confidence,industry returns,irrationality,Sweden},
  language     = {eng},
  note         = {Student Paper},
  title        = {Investor Sentiment: An empirical study on Swedish Industries},
  year         = {2016},
}