This paper examines the equity market reaction to the monthly release of Australian consumer sentiment news. Our results indicate that consumer sentiment has valuable information content. Further, we document a version of the “negativity effect” (from the psychology literature) in which, upon announcement of bad (good) sentiment news, the equity market experiences a significant negative (no) announcement day effect. Notably, we find that the market recovers from the bad news shock relatively quickly post-announcement. The results are robust to a broad range of additional tests.
- investor sentiment
- stock market returns
- market efficiency
Akhtar, S., Faff, R., Oliver, B., & Subrahmanyam, A. (2011). The power of bad: the negativity bias in Australian consumer sentiment announcements on stock returns. Journal of Banking and Finance, 35(5), 1239-1249. https://doi.org/10.1016/j.jbankfin.2010.10.014