Discuss the theoretical underpinnings for empirical findings of Yu and Yuan (2011). [6 marks]
Suppose that you decide to extend the US evidence from Yu and Yuan (2011) to another market. Select a market and motivate your selection. [8 marks]
Critically review related literature, and summarise and evaluate approaches to construct proxies for investor sentiment. [12 marks]
Determine a proxy for investor sentiment in your selected market, and elaborate motivation for your selection. [8 marks]
Present descriptive statistics of (i) market returns of the selected market and (ii) investor sentiment. [15 marks]
Select one method to filter conditional volatility of market returns, and present descriptive statistics of conditional volatility. [15 marks]
Examine (i) the relation between market returns and investor sentiment, and (ii) the relation between market returns and conditional volatility. Discuss potential limitations of your work. [36 marks]
While attempting requirements 1–7 you should follow academic writing style format relying on journal articles. Failing to do so will lead to a FAIL in this module.
Guideline coverage of issues/answers expectations:
Requirement 1:
Provide theoretical underpinnings of the findings in Yu and Yuan (2011).
Requirement 2:
Select a non-US market.
Motivate your choice.
Requirement 3:
Specific reasons why proxies are required for investor sentiment.
Summarise main types proxies for investor sentiment
Evaluate merits and drawbacks of each type.
Requirement 4:
Select a proxy for investor sentiment.
Motivate your selection.
Requirement 5:
Present descriptive statistics of market returns of the selected market.
Present descriptive statistics of investor sentiment.
Interpret.
Requirement 6:
Select the method to filter conditional volatility.
Motivate your selection.
Present descriptive statistics of conditional volatility.
Interpret.
Requirement 7:
Examine the relation between market returns and investor sentiment.
Examine the relation between market returns and conditional volatility.
Interpret.
Discuss limitations of your analysis.
Along with the main report, you also need to submit the original dataset and screenshots of results from SPSS or EViews.
