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Student Number 954208019
Author Chen-An Wang(¤ý®¶¦w)
Author's Email Address No Public.
Statistics This thesis had been viewed 1764 times. Download 525 times.
Department Finance
Year 2007
Semester 2
Degree Master
Type of Document Master's Thesis
Language English
Title Investor Sentiment and Momentum Profits
Date of Defense 2008-06-16
Page Count 45
Keyword
  • contrarian
  • momentum
  • sentiment index
  • Abstract This study examines the relationship between sentiment indices and zero-cost momentum profits. We use the slope of implied volatility curve to calculate the IV-Sentiment index and principal component analysis to extract the BW-Sentiment index. Based on pre-ranking period of 12 months, we evidence that momentum strategies are profitable for holding periods range from 3 to 12 months, however, contrarian strategies are profitable for 24 and 36 months holding periods, indicate that U.S. stock market exists short-term momentum and long-term reversal over the period January 1996 through December 2003. Regressing one month ahead cumulative momentum returns on market return index, liquidity factor, BW-Sentiment index, and IV-Sentiment index, the results show that BW-Sentiment play the role
    of contrarian indicator. After decomposing the IV-Sentiment index, we find that short-term IV-Sentiment index is a proxy for underreaction (momentum indicator), but long-term IV-Sentiment index is a proxy for overreaction (contrarian indicator). Because the intercepts of multivariate regressions are all insignificant, IV-Sentiment index and BW-Sentiment index seem to systematically explain the returns of zero-cost momentum strategies.
    Table of Content 1 Introduction 1
    2 Data and Methodology 6
    2.1 Data . . . . . . . . . . . . . . . . . . . . . . . 6
    2.2 Methodology . . . . . . . . . . . . . . . . . . . 6
    2.2.1 Double-Log Model . . . . . . . . . . . . 6
    2.2.2 Principal Component Analysis . . . . . . 7
    2.2.3 Liquidity Factor . . . . . . . . . . . . . 9
    3 Empirical Tests 11
    3.1 The Returns of Momentum Portfolios . . . . . . 11
    3.2 The Relationship between Variables . . . . . . . 13
    3.3 Descriptive Statistics . . . . . . . . . . . . . . . 15
    3.4 Regression . . . . . . . . . . . . . . . . . . . . 18
    3.5 Decomposition of the IV-Sentimentcum index . . 20
    4 Conclusion 21
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    Advisor
  • Pin-Huang Chou(©P»«°Ä)
  • Files
  • 954208019.pdf
  • approve in 2 years
    Date of Submission 2008-06-27

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