BAR. Brazilian Administration Review
versão On-line ISSN 1807-7692
YOSHINAGA, Claudia Emiko e CASTRO JUNIOR, Francisco Henrique Figueiredo de. The relationship between market sentiment index and stock rates of return: a panel data analysis. BAR, Braz. Adm. Rev. [online]. 2012, vol.9, n.2, pp. 189-210. ISSN 1807-7692. http://dx.doi.org/10.1590/S1807-76922012000200005.
This article analyzes the relationship between market sentiment and future stock rates of return. We used a methodology based on principal component analysis to create a sentiment index for the Brazilian market with data from 1999 to 2008. The sample consisted of companies listed on BM&F BOVESPA which were grouped into quintiles, each representing a portfolio, according to the magnitude of the following characteristics: market value, total annualized risk and listing time on BM&F BOVESPA. Next, we calculated the average return of each portfolio for every quarter. The data for the first and last quintiles were analyzed via two-factor ANOVA, using sentiment index of the previous period (positive or negative) as the main factor and each characteristic as controlling factors. Finally, the sentiment index was included in a panel data pricing model. The results indicate a significant and negative relationship between the market sentiment index and the future rates of return. These findings suggest the existence of a reversion pattern in stock returns, meaning that after a positive sentiment period, the impact on subsequent stock returns is negative, and vice-versa.
Palavras-chave : sentiment index; pricing model; GMM panel data.