Influence of Investor Sentiment on the Russian Stock Market

Student: Kochetova Anna

Educational Programme: Financial Markets and Financial Institutions (Master)

Year of Graduation: 2019

In this paper, we investigate the impact of the sentiment index on the Russian stock market. Using the principal components analysis, we have built sentiment indices containing factors relevant to the Russian market. The best sentiment index is the first component of factors such as consumer price index, interest rate and change in money supply. We built a threshold autoregressive model and determined that the Russian stock market is divided into three regimes – a period of high return, low and medium. Also, we have determined that the excess of the index above the upper threshold is a signal of the onset of the crisis. Moreover, we used the thresholds to build a trading strategy and were able to beat the market.

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