We find that Baker and Wurgler's Investor Sentiment Index affects the O/S-return relation after controlling for consumer sentiment indices and economic environment factors.
Furthermore, numerous studies adopt consumer sentiment indices as alternative measures of investor sentiment (Lemmon and Portniaguina, 2006; Antoniou, Doukas, and Subrahmanyam, 2013).
First, the two consumer sentiment indices mentioned above are obtained through a survey-based methodology that involves US households.
Johnson and So (2012) use a firm-specific measure of short sale constraints, while we deal with market-wide sentiment indices.
Consequently, the BW Investor Sentiment Index has an effect on future stock returns that consumer sentiment indices are unable to match making this effect unique.
Prior studies concentrate on the similarities between investor sentiment and consumer sentiment and these studies generally use consumer sentiment indices as alternative measures of investor sentiment in the stock market.
The MCSI and the CB Index are two important consumer sentiment indices.
The questions related to both consumer sentiment indices are divided into two parts: (1) the present situation component and (2) the expectations component.
We also provide the correlation table for the B W Investor Sentiment Index, the consumer sentiment indices, the Chicago Fed National Activity Index (CFNAI), and past market returns.
The correlation between the two consumer sentiment indices is much higher (i.