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Does investors’ sentiment predict stock price changes? With analyses of naive extrapolation and the salience hypothesis in Japan

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  • Chikashi Tsuji

Abstract

This paper investigates the forecast power and the characteristics of investors’ sentiment in Japan. According to the empirical analyses, Japanese investors’ sentiment has some forecast power for one month's future equity market dynamics. In addition, evidence is found that simultaneous and synthetic use of several sentiment variables is helpful for predicting future stock price changes in the short-term forecasting period. However, in contrast to findings in the USA, evidence cannot be found for ‘naive extrapolation’ or the ‘salience effect’ in Japanese investors’ sentiment.

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  • Chikashi Tsuji, 2006. "Does investors’ sentiment predict stock price changes? With analyses of naive extrapolation and the salience hypothesis in Japan," Applied Financial Economics Letters, Taylor & Francis Journals, vol. 2(6), pages 353-359.
    • Handle: RePEc:taf:raflxx:v:2:y:2006:i:6:p:353-359
    DOI: 10.1080/17446540600690136
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    Cited by:

    1. Riso, Luigi & Vacca, Gianmarco, 2024. "Sentiment dynamics and volatility: A study based on GARCH-MIDAS and machine learning," Finance Research Letters, Elsevier, vol. 62(PB).

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