TCD and Yale Researchers To Study Stock Market Sentiment

Posted on: 06 October 2007

Trinity College ‘s School of Business and the International Centre for Finance (ICF) at  the Yale School of Management  have announced a collaborative research project on the collection, analysis and dissemination of a survey instrument designed to measure investor attitudes to the stock market in both Ireland and the UK . This survey is the first of its kind to be carried out in Europe , designed as it is from the basis of modern behavioural finance principles. 

Commenting on the significance of the  new survey, Professor Brian Lucey of the School of Business  who will be leading the TCD strand of the research said: “Most existing indices of stock market sentiment are one-dimensional: they infer the sentiment of the market from option prices, trading volume, or other internal market outcomes. As such they focus on the past and on the internal aspects of the market.  This survey  is more complete, designed from a research base, and is designed to capture not just the level but the determinants of investor sentiment. With the 20^th anniversary of the 1987 stock market crash approaching, and against the background of recent stock market turbulence, the survey is particularly timely.”

The survey, which will be carried out monthly, will cover individual and institutional investors in  Ireland and the UK . It builds on an existing research project which aims to extract sentiment measures from financial news. The results of the regular survey will assist academics and financial services professionals to better understand the changing dynamics of the stock market. The TCD researchers are drawn from the Trinity Investor Sentiment Group which includes the School of Business and the School of Computer Science .

 “We are enthusiastic about collaborating with Trinity College and its School of Business .  Investor attitudes are important determinants of the trends in the financial markets, and we hope our joint research project will help understand the psychological factors influencing these markets,” commented Dr. William N. Goetzmann, Director of the International Centre for Finance at Yale.

 The formal launch of the project will be in early February, when initial results for a number of months analysis will be presented. Monthly publication will occur thereafter

“We are delighted to announce this linkup with Yale University . This is only the second time that the ICF has agreed to collaborate on this type of research. The project will act to cement TCD Business School ‘s reputation as the leading centre for research on finance in Ireland ,” added Professor Lucey.

“To fully understand the dynamics of the stock market, it is essential to gain deeper understanding of the state of mind of the participants. Modern behavioural finance allows us to achieve an ever greater understanding of not just what investors expect but why they expect this and how they form these expectations. This survey will allow us to do this,” he  concluded.