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The Construction of an Investor Sentiment Index for Sweden and its Impact on the Stock Market

Zhang, Xuming LU and Zhang, Wenlu LU (2023) NEKN02 20231
Department of Economics
Abstract
Investor sentiment is an important research object in behavioral finance, and its analysis has been one of the hot topics in stock market research recently. As an abstract concept, investor sentiment needs to be visualized by the construction of the investor sentiment index. In 2006, Baker and Wurgler proposed the Baker & Wurgler (BW) index, which can reflect investor sentiment in the American market. Based on the fundamental investor sentiment index BW, we develop and propose a new index RSent adapted to the Swedish market by principal component analysis. The new index RSent involves six variables (economic sentiment index, consumer confidence index, turnover, IPO number, IPO return, and equity-to-debt ratio) and constrains it by the... (More)
Investor sentiment is an important research object in behavioral finance, and its analysis has been one of the hot topics in stock market research recently. As an abstract concept, investor sentiment needs to be visualized by the construction of the investor sentiment index. In 2006, Baker and Wurgler proposed the Baker & Wurgler (BW) index, which can reflect investor sentiment in the American market. Based on the fundamental investor sentiment index BW, we develop and propose a new index RSent adapted to the Swedish market by principal component analysis. The new index RSent involves six variables (economic sentiment index, consumer confidence index, turnover, IPO number, IPO return, and equity-to-debt ratio) and constrains it by the macroeconomic environment’s impact. Furthermore, we explored the impact of this index on the Swedish stock market performance as represented by OMXS 30 and OMXS PI. We find that this investor sentiment has a positive impact on the Swedish stock market performance. (Less)
Please use this url to cite or link to this publication:
author
Zhang, Xuming LU and Zhang, Wenlu LU
supervisor
organization
course
NEKN02 20231
year
type
H1 - Master's Degree (One Year)
subject
keywords
Investor sentiment, principal component analysis, Swedish stock market
language
English
id
9118871
date added to LUP
2023-11-24 08:58:04
date last changed
2023-11-24 08:58:04
@misc{9118871,
  abstract     = {{Investor sentiment is an important research object in behavioral finance, and its analysis has been one of the hot topics in stock market research recently. As an abstract concept, investor sentiment needs to be visualized by the construction of the investor sentiment index. In 2006, Baker and Wurgler proposed the Baker & Wurgler (BW) index, which can reflect investor sentiment in the American market. Based on the fundamental investor sentiment index BW, we develop and propose a new index RSent adapted to the Swedish market by principal component analysis. The new index RSent involves six variables (economic sentiment index, consumer confidence index, turnover, IPO number, IPO return, and equity-to-debt ratio) and constrains it by the macroeconomic environment’s impact. Furthermore, we explored the impact of this index on the Swedish stock market performance as represented by OMXS 30 and OMXS PI. We find that this investor sentiment has a positive impact on the Swedish stock market performance.}},
  author       = {{Zhang, Xuming and Zhang, Wenlu}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Construction of an Investor Sentiment Index for Sweden and its Impact on the Stock Market}},
  year         = {{2023}},
}