Investor sentiment and the market reaction to macroeconomic news

Investor sentiment and the market reaction to macroeconomic news

We provide evidence that the stock market response to macroeconomic news weakens in times of high investor sentiment. The reaction to macroeconomic information is 50% weaker in times of elevated bullish investor sentiment, relative to periods of low sentiment. This dampening effect holds for both go...

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Veröffentlicht in:The journal of futures markets 2021-09, Vol.41 (9), p.1412-1426
Hauptverfasser: Gu, Chen, Chen, Denghui, Stan, Raluca
Format: Artikel
Sprache:eng
Schlagworte:
intraday data
Investments
Investor behavior
investor sentiment
Investors
macroeconomic announcements
Macroeconomics
market efficiency
News
Prices
Securities markets
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Zusammenfassung:We provide evidence that the stock market response to macroeconomic news weakens in times of high investor sentiment. The reaction to macroeconomic information is 50% weaker in times of elevated bullish investor sentiment, relative to periods of low sentiment. This dampening effect holds for both good and bad macroeconomic news. Investor sentiment seems to hinder the incorporation of public information into asset prices. Our findings shed new light on how investor sentiment affects the link between fundamentals and security prices.
ISSN:0270-7314
1096-9934
DOI:10.1002/fut.22219