Downside risk

what the consumer sentiment index reveals

Authors

  • Mark A. Johnson Department of Finance, The Sellinger School of Business and Management, Loyola University
  • Atsuyuki Naka Department of Economics and Finance, College of Business Administration, University of New Orleans

DOI:

https://doi.org/10.61190/fsr.v23i1.3185

Keywords:

Long-horizon regression, Asymmetric response, Downside risk, Consumer sentiment

Abstract

This article examines the ability of consumer sentiment for different age groups to forecast short-term as well as long-term equity returns. Using a long-horizon asymmetric response regression format, we show that negative changes in sentiment have a greater influence on stock returns than positive changes in sentiment. Our findings are supportive of the prospect theory. However, we observe that younger individuals appear to be less risk-averse than older individuals. We provide evidence that reminds individual investors and financial planners that risk is an important consider- ation when investing, and that demographic characteristics matter when determining appropriate investing approaches and risk tolerance.

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Published

2014-03-01

How to Cite

Johnson, M. A., & Naka, A. (2014). Downside risk: what the consumer sentiment index reveals. Financial Services Review, 23(1), 45–61. https://doi.org/10.61190/fsr.v23i1.3185

Issue

Section

New Original Submission