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Advisor(s)
Abstract(s)
This dissertation provides insights into the impact of sentiment factors on
stock market volatility using monthly panel data from Germany, the UK and the US
from 2002-2022. The main objective is to understand how the consumer confidence
index, the trading volume, the put/call ratio, and the number of IPOs - components of
the sentiment index used in this research - affect the volatility of the DAX 40, FTSE
100, and S&P 500 indices, respectively. The results suggest that investor sentiment has
impact on market volatility in all three indices. In particular, a higher consumer
confidence index correlates with lower volatility, suggesting that positive sentiment
stabilizes markets. Conversely, increased trading volume and a higher put/call ratio are
associated with increased volatility, reflecting greater market activity and investor
uncertainty. In addition, the number of IPOs serves as a sentiment gauge, with increased
IPO activity corresponding to a more optimistic market outlook and contributing to
lower volatility. Overall, the results underscore the importance of integrating sentiment
measures into financial analysis and provide valuable insights for investors and
policymakers seeking to understand and manage market fluctuations. This research
contributes to the behavioural finance literature by elucidating the complex interplay
between investor sentiment and stock market behaviour.
Description
Keywords
Sentiment Volatility Stock market
Pedagogical Context
Citation
Carvalho, Carolina e Silva Correia de (2024). “Measuring sentiment: the impact on financial markets volatility ”. Dissertação de Mestrado. Universidade de Lisboa. Instituto Superior de Economia e Gestão.
Publisher
Instituto Superior de Economia e Gestão