Open Access Article SciPap-1105
Sentiment on the Stock Markets: Evidence from the Wavelet Coherence Analysis
by Zuzana Janková 1,* iD icon

1 Faculty of Business and Management, Institute of Informatics, Brno University of Technology, Kolejní 2906/4, Královo Pole, Brno 612 00, Czechia

* Authors to whom correspondence should be addressed.

Abstract: In this paper we propose to use wavelet analysis to determine the relationship between investor sentiment and stock index. Based on stock indices in various markets and alternative indicators, sentiment using wave analysis uses the intensity and correlation between sentiment and stock index returns in the short and long term. Initially a strong relationship identified by wavelet coherence and phase difference gradually becomes less intense with increasing time horizon. This suggests that overestimation or underestimation in the short term is gradually corrected in the long run. In addition, a stronger relationship can be observed between investor sentiment and stock indices in times of crisis, including COVID-19 pandemics.

Keywords: Sentiment Index, Stock Index, Stock, Market, Wavelet Analysis, Wavelet Coherence

JEL classification:   G12 - Asset Pricing • Trading Volume • Bond Interest Rates,   G15 - International Financial Markets,   G17 - Financial Forecasting and Simulation

SciPap 2020, 28(3), 1105;

Received: 24 June 2020 / Revised: 31 August 2020 / Accepted: 22 September 2020 / Published: 7 October 2020