Timing the market: the economic value of price extremes

Financial Innovation

Table 16 Regression with Sentiment Index Controlled

PML _t ^F	SI _t	SI _t+1	PML _t ^F	ASI _t	ASI _t+1
0.136^***
0.162^***	-0.018		0.163^***	-0.012
0.151^***	1.225^***	-1.256^***	0.164^**	0.661^***	-0.688^***

Note;The sentiment index is available from the homepage of Guofu Zhou: http://apps.olin.wustl.edu/faculty/zhou/. Only monthly sentiment index data is only available for the sample period from July 1965 to December 2014. Our benchmark model is PMG^F_t+1=C +αPML^F_t + ε_t+1, where P MG^F_t+1 and P ML^F_t are filtered observations. Regression with sentiment index controlled is presented as follows,
P MG^F_t+1 = C + αP ML^F_t + β₁IS_t + β₂IS_t + 1 + ε_t + 1;
where IS_t=SI_t or ASI_t. SI_t and ASI_t represent respectively the sentiment index of Baker and Wurgler (2006) and the aligned sentiment index of Huang et al. (2015). The constant C is not reported in the table for space-saving. ***, **, * mean respectively significance at the level of 1%, 5% and 10%