The linkage between aggregate investor sentiment and metal futures returns: A nonlinear approach

Yao Zheng

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

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.

Original languageEnglish (US)
Pages (from-to)128-142
Number of pages15
JournalQuarterly Review of Economics and Finance
Volume58
DOIs
StatePublished - Nov 1 2015

Fingerprint

Metals
Investor sentiment
Linkage
Stock market
Liquidity
Asymmetric response
Market sentiment
Demand shocks
Conditional volatility
Open interest
Sentiment
Asymmetry
Flight to quality

Keywords

  • Investor sentiment
  • Markov regime-switching
  • Metal futures
  • VAR-GARCH-M

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

The linkage between aggregate investor sentiment and metal futures returns : A nonlinear approach. / Zheng, Yao.

In: Quarterly Review of Economics and Finance, Vol. 58, 01.11.2015, p. 128-142.

Research output: Contribution to journalArticle

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