Title: Exuberance: Sentiments driven buoyancy
Authors: Anurag Banerjee - Durham University (United Kingdom) [presenting]
Guillaume Chevillon - ESSEC Business School (France)
Abstract: The expected growth in consumption is based on consumer sentiment, which can produce temporary bubbles in the asset markets. We present a model based on by consumption CAPM, where prices are driven by expectations in consumption growth. Our econometric model is flexible random coefficient model that allows multiple bubbles impact of sentiments on asset price dynamics: ``buoyancy'' driven by local optimism. We estimate models with candidate ``sentiments'' variables for forecasting asset returns. We also propose a test under the null hypothesis that consumer ``sentiments'' do not matter and the asset prices are simple driven by a random walk.