The relationship between market sentiment and equity premium: An artificial neural network analysis

Nik R. Hassan, Shee Q. Wong

Research output: Contribution to journalArticlepeer-review

8 Scopus citations

Abstract

This study explores whether market sentiment is significantly related to equity premium levels using the Artificial Neural Network (ANN) framework with both the Conference Board CCI and the Michigan Consumer Sentiment Index (CSI) as market sentiment proxies. Contrary to several studies, our results showed that after controlling for a standard set of fundamental variables, there is little evidence to support a strong direct relationship between market sentiment and equity premium. However, these results agree with other empirical studies that find market sentiment to be a reflection of market fundamentals, which in turn actually affect equity premium levels.

Original languageEnglish (US)
Pages (from-to)227-240
Number of pages14
JournalInternational Journal of Electronic Finance
Volume2
Issue number2
DOIs
StatePublished - 2008
Externally publishedYes

Keywords

  • ANNs
  • Artificial Neural Networks
  • Consumer sentiment
  • Equity premium forecasting
  • Fundamentals
  • Market sentiment
  • Nonlinearity

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