TY - JOUR
T1 - The linkage between aggregate investor sentiment and metal futures returns
T2 - A nonlinear approach
AU - Zheng, Yao
PY - 2015/11/1
Y1 - 2015/11/1
N2 - This paper examines the relationship between aggregate stock market sentiment and metal futures returns. Overall, metal futures have higher returns when investor sentiment is pessimistic rather than optimistic. Further analysis indicates that metal futures returns exhibit asymmetric responses to positive and negative investor sentiment shocks. Temporary and reactive demand shocks and flight to quality concerns may partially explain this asymmetry. In addition, there exists a negative predictive relationship between investor sentiment and metal futures returns, which remains persistent even after controlling for liquidity and open interest. Moreover, this predictive effect of sentiment on metal futures returns is magnified when there is high conditional volatility.
AB - This paper examines the relationship between aggregate stock market sentiment and metal futures returns. Overall, metal futures have higher returns when investor sentiment is pessimistic rather than optimistic. Further analysis indicates that metal futures returns exhibit asymmetric responses to positive and negative investor sentiment shocks. Temporary and reactive demand shocks and flight to quality concerns may partially explain this asymmetry. In addition, there exists a negative predictive relationship between investor sentiment and metal futures returns, which remains persistent even after controlling for liquidity and open interest. Moreover, this predictive effect of sentiment on metal futures returns is magnified when there is high conditional volatility.
KW - Investor sentiment
KW - Markov regime-switching
KW - Metal futures
KW - VAR-GARCH-M
UR - http://www.scopus.com/inward/record.url?scp=84947863805&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84947863805&partnerID=8YFLogxK
U2 - 10.1016/j.qref.2015.02.008
DO - 10.1016/j.qref.2015.02.008
M3 - Article
AN - SCOPUS:84947863805
SN - 1062-9769
VL - 58
SP - 128
EP - 142
JO - Quarterly Review of Economics and Finance
JF - Quarterly Review of Economics and Finance
ER -