The box office as leading investor sentiment indicator

Abstract

This study shows that lagged box office real gross earnings (BRGE) in the film industry and investor sentiment are negatively correlated. BRGE also enhances the out-of-sample R-squared for sentiment prediction. The study hypothesizes that sentiment changes are transmitted more quickly through the film industry than through other economic indicators. When sentiment declines, people reduce discretionary spending and opt for more affordable leisure activities. From an economic perspective, going to the cinema is a relatively low-cost entertainment activity. From a behavioral standpoint, low sentiment may also drive escapism, which cinema can fulfill. Consequently, BRGE serves as a leading contrarian indicator of sentiment shifts.

Keywords: sentiment forecasts, film industry, box office earnings, economic indicators, consumer behavior JEL: D12, G11, G12, G17, G40

JEL Classification: G40, D12, G11, G17, G12