Decomposing the Effect of Consumer Sentiment News - Evidence from US Stock and Stock Index Futures Markets

39 Pages Posted: 19 Aug 2011

See all articles by Shumi M. Akhtar

Shumi M. Akhtar

The University of Sydney

Robert W. Faff

University of Queensland; Bond University

Barry R. Oliver

University of Queensland - Business School; Financial Research Network (FIRN)

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area; Institute of Global Finance, UNSW Business School; Financial Research Network (FIRN)

Date Written: May 27, 2011

Abstract

We examine the announcement effects of consumer sentiment on US stock and stock futures markets. First, we find that the consumer sentiment announcement has valuable information content. Second, an asymmetric response is observed for “good” versus “bad” sentiment news. Specifically, when a lower (higher) than previous month consumer sentiment index is announced, equity and futures markets experience a significant negative announcement day (no) effect. This supports the “negativity effect” (identified from the psychology literature). Third, the effect of negative consumer sentiment announcements is evident in salient stocks rather than in sentiment prone stocks. This supports the availability heuristic.

Keywords: investor sentiment, stock market returns, market efficiency

JEL Classification: G14

Suggested Citation

Akhtar, Shumi M. and Faff, Robert W. and Oliver, Barry Ross and Subrahmanyam, Avanidhar, Decomposing the Effect of Consumer Sentiment News - Evidence from US Stock and Stock Index Futures Markets (May 27, 2011). 24th Australasian Finance and Banking Conference 2011 Paper, Available at SSRN: https://ssrn.com/abstract=1911089 or http://dx.doi.org/10.2139/ssrn.1911089

Shumi M. Akhtar (Contact Author)

The University of Sydney ( email )

University of Sydney Business School
corner of Codrington Street and Darlington Street
Chippendale, NSW 2006
Australia
61290369309 (Phone)

HOME PAGE: http://www.firn.org.au

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Bond University ( email )

Gold Coast, QLD 4229
Australia

Barry Ross Oliver

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-5355 (Phone)
310-206-5455 (Fax)

Institute of Global Finance, UNSW Business School

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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