Exploiting Investor Sentiment for Portfolio Optimization

Inhaltsverzeichnis (Table of Contents)

• Introduction
• Studies about Sentiment
• Sentiment by Surveys
• Sentiment by Financial Variables
• Sentiment by News
• Research Questions
• Empirical Methodology
• Sentiment Data
• Sentiment Index Computation
• Incorporating Sentiment into the Portfolio
• Black-Litterman Approach
• Copula Opinion Pooling
• Portfolio Optimization
• Empirical Approach
• Performance Measurement and Benchmarks
• Results
• Training Period Results
• Test Period Results
• Robustness Checks
• Discussion
• Sentiment Effect by Market
• Sentiment Effect by Sign
• Sentiment Effect by Business Cycle

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This thesis investigates the impact of investor sentiment on international financial markets. It aims to develop and test a sentiment-based trading strategy that exploits the medium-term reversal effect of sentiment. The study utilizes the Copula Opinion Pooling approach to incorporate sentiment measures into portfolio optimization, aiming to demonstrate the value of sentiment information for quantitative portfolio managers.

• Investor sentiment and its influence on financial markets
• Measuring and incorporating sentiment into portfolio optimization
• Developing and testing a sentiment-based trading strategy
• The medium-term reversal effect of sentiment
• The value of sentiment information for quantitative portfolio management

Zusammenfassung der Kapitel (Chapter Summaries)

• Introduction: This chapter introduces the concept of investor sentiment and its importance in financial markets. It reviews existing studies on sentiment, focusing on surveys, financial variables, and news-based approaches. The chapter also outlines the research questions addressed in the thesis.
• Empirical Methodology: This chapter details the methodology used to collect and analyze sentiment data. It describes the construction of sentiment indices using the Copula Opinion Pooling approach and explains how sentiment is incorporated into portfolio optimization. The chapter also outlines the empirical approach, performance measurement metrics, and benchmarks used in the study.
• Results: This chapter presents the results of the empirical analysis. It discusses the performance of the sentiment-based trading strategy during both the training and test periods. Robustness checks are also conducted to ensure the reliability of the findings.
• Discussion: This chapter discusses the findings in detail, analyzing the sentiment effect by market, sign of the sentiment index, and business cycle.

Schlüsselwörter (Keywords)

Investor sentiment, financial markets, portfolio optimization, Copula Opinion Pooling, sentiment-based trading strategy, medium-term reversal effect, quantitative portfolio management.