Sentiment and Financial Health Indicators for Value and Growth Stocks: The European Experience |
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Authors: | Ron Bird Lorenzo Casavecchia |
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Institution: | 1. University of Technology Sydney , Australia;2. University of Technology Sydney , Australia;3. Bocconi University , Italy |
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Abstract: | In this study, we analyse the effect of macroeconomic surprises on inflation compensation data – the sum of inflation expectation, risk and liquidity premia – in the euro area. The empirical analysis is based on a daily data set, which covers a wide spectrum of maturities, stemming from inflation-indexed markets between 2 January 2004 and 31 December 2007. Our results suggest that when gauging short- and medium-term inflation compensations, market operators are sensitive to surprises related to real activity and prices. Notwithstanding, long-term inflation compensations remain generally unresponsive to macroeconomic surprises, attesting the European Central Bank's high credibility on the sample under consideration. The study also cross-checks the results from two different euro area inflation-indexed instruments (bonds and swaps) which differ slightly regarding medium-term horizon but give a similar picture regarding long-term horizons. |
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Keywords: | Sentiment financial health market efficiency asset pricing anomalies |
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