Article Summary Paper Essay Example | Topics and Well Written Essays - 750 words

Article Summary Paper - Essay Example The study aimed at investigating effects of investors’ perceptions over stock and the stock’s returns in the international scope. One of the study’s hypothesis predicted relationship between the sentiments and stock returns in the international market while the other two hypotheses predicted effects of environmental factors to the relationship between investors’ attitude towards stock and returns. The following economic question can therefore be inferred for the study (Schemeling 394, 395). The author expected an inverse relationship between invertors’ sentiments and stock returns and their conceptual framework and reviewed literature informs this. The author noted deviation from the standard finance theory that argues for the role of arbitrageurs in eliminating irrationality in the stock market. Literature suggested that investors’ opinions are persistent and that arbitrage is not effective in managing irrationality. These suggested effects of investor sentiments on stock returns and reported inverse relationship from the United States’ stock market, being inferred to the international market, informed the expectation (Schemeling 394, 395). Stock returns and investor sentiments were the study’s main theoretical variables and consumers’ confidence was used as the empirical proxy for investor sentiments. Background information on availability of the proxy, both on cross sectional and time series scope, and its consistency informed use of the proxy. Unlike consumer confidence, other possible indicators of investor sentiment are not consistent. â€Å"Agreegate stock market,† â€Å"portfolio of value stock† and â€Å"portfolio of growth stock† were however proxies for stock returns (Schemeling 397). Professor Kenneth French’s website was the data source for stock return proxies while Directorate Generale for Economic and Financial Affaire, Datastream and Ecowin were the data sources for consumer confidence (Schemeling 397). Where rt+1 defines