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]

1. Discuss the theoretical underpinnings for empirical findings of Yu and Yuan (2011).                                                                                                             [6 marks]
2. 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]
3. Critically review related literature, and summarise and evaluate approaches to construct proxies for investor sentiment.                                     [12 marks]
4. Determine a proxy for investor sentiment in your selected market, and elaborate motivation for your selection.                                     [8 marks]
5. Present descriptive statistics of (i) market returns of the selected market and (ii) investor sentiment.                                                                                                 [15 marks]
6. Select one method to filter conditional volatility of market returns, and present descriptive statistics of conditional volatility.                                                                                                                                     [15 marks]
7. 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:

1. Provide theoretical underpinnings of the findings in Yu and Yuan (2011).

 

Requirement 2:

1. Select a non-US market.
2. Motivate your choice.

 

Requirement 3:

1. Specific reasons why proxies are required for investor sentiment.
2. Summarise main types proxies for investor sentiment
3. Evaluate merits and drawbacks of each type.

 

Requirement 4:

1. Select a proxy for investor sentiment.
2. Motivate your selection.

 

Requirement 5:

1. Present descriptive statistics of market returns of the selected market.
2. Present descriptive statistics of investor sentiment.

 

Requirement 6:

1. Select the method to filter conditional volatility.
2. Motivate your selection.
3. Present descriptive statistics of conditional volatility.

 

Requirement 7:

1. Examine the relation between market returns and investor sentiment.
2. Examine the relation between market returns and conditional volatility.
4. Discuss limitations of your analysis.

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