Shipping investor sentiment and international stock return predictability

• Published in: Transportation research. Part E, Logistics and transportation review Vol. 96; pp. 81 - 94
• Main Authors: Papapostolou, Nikos C., Pouliasis, Panos K., Nomikos, Nikos K., Kyriakou, Ioannis
• Format: Journal Article
• Language: English
• Published: Elsevier India Pvt Ltd 01.12.2016
• Subjects: Economics; Gain; Investment; Logistics; Out-of-sample forecast performance; Raw materials; Shipping; Shipping investor sentiment; Stock return predictability; Transportation; Utilities; C53; G02; G12; Stock return predictability; Shipping investor sentiment; Out-of-sample forecast performance
• ISSN: 1366-5545; 1878-5794
• DOI: 10.1016/j.tre.2016.10.006

•Shipping sentiment is a common predictor of international stock returns.•Tanker sentiment is a contrarian predictor of financial assets.•Tanker sentiment can offer economic value for a mean-variance investor. Stock return predictability by investor sentiment has been subject to constant updating, but reaching a decisive conclusion seems rather challenging as academic research relies heavily on US data. We provide fresh evidence on stock return predictability in an international setting and show that shipping investor sentiment is a common leading indicator for financial markets. We establish out-of-sample predictability and demonstrate that investor sentiment is also economically significant in providing utility gains to a mean-variance investor. Finally, we find evidence that the predictive power of sentiment works best when negative forecasts are also taken into account.