TY  - JOUR
AU  - Qiu,Lily
AU  - Welch,Ivo
TI  - Investor Sentiment Measures
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10794
PY  - 2004
Y2  - September 2004
UR  - http://www.nber.org/papers/w10794
L1  - http://www.nber.org/papers/w10794.pdf
N1  - Author contact info:
Lily Qiu
Brown University
E-Mail: Lily_Qiu@brown.edu

Ivo Welch
Anderson School at UCLA (C519)
110 Westwood Place (951481)
Los Angeles, CA 90095-1482
E-Mail: ivo.welch@anderson.ucla.edu
AB  - This paper compares investor sentiment measures based on consumer confidence surveys with measures extracted from the closed-end fund discount (CEFD). Our evidence suggests that these two kinds of sentiment measures do not correlate well with one another. For a short 2 - 4 year period in which we have direct investor sentiment survey data from UBS/Gallup, only the consumer confidence correlates well with investor sentiment. Further, only the consumer confidence based measure can robustly explain the small-firm return spread and the return spread between stocks held disproportionately by retail investors and those held by institutional investors. Surprisingly, there is even a hint that the consumer confidence measure can explain closed-end fund IPO activity, while the CEFD cannot. In sum, our evidence supports the view that sentiment plays a role in financial markets, but that the CEFD may be the wrong measure of sentiment.
ER  -