Investor sentiment and stock returns:Some international evidence

We examine whether consumer confidence – as a proxy for individual investor sentiment –affects expected stock returns internationally in 18 industrialized countries. In line with recentevidence for the U.S., we find that sentiment negatively forecasts aggregate stock marketreturns on average across countries. When sentiment is high, future stock returns tend to belower and vice versa. This relation also holds for returns of value stocks, growth stocks, smallstocks, and for different forecasting horizons.[...]