TY  - UNPD
A1  - Gao, Can
A1  - Martin, Ian
T1  - Volatility, valuation ratios, and bubbles: an empirical measure of market sentiment
T2  - SAFE working paper ; No. 312
N2  - We define a sentiment indicator that exploits two contrasting views of return predictability, and study its properties. The indicator, which is based on option prices, valuation ratios and interest rates, was unusually high during the late 1990s, reflecting dividend growth expectations that in our view were unreasonably optimistic. We interpret it as helping to reveal irrational beliefs about fundamentals. We show that our measure is a leading indicator of detrended volume, and of various other measures associated with financial fragility. We also make two methodological contributions. First, we derive a new valuation-ratio decomposition that is related to the Campbell and Shiller (1988) loglinearization, but which resembles the traditional Gordon growth model more closely and has certain other advantages for our purposes. Second, we introduce a volatility index that provides a lower bound on the market's expected log return.
T3  - SAFE working paper - 312 
KW  - bubbles
KW  - option prices
KW  - sentiment
KW  - valuation ratios
KW  - volatility
Y1  - 2021
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/58275
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-582759
IS  - January, 2021
PB  - SAFE
CY  - Frankfurt am Main
ER  -