Incorporating Macroeconomic Indicators and the Baker-Wurgler Investor Sentiment Model to Forecast Market Returns
Faculty Sponsor(s)
Eric Schuck
Subject Area
Economics
Description
The ability to predict rises and falls in financial markets has long been studied, with multiple models developed. This research seeks to develop a new model by extending the Baker-Wurgler Investor Sentiment Model to include macroeconomic variables while giving respect to differences in financial regulations. Through Ordinary Least Squares Regression, we seek to predict market returns, proxied by the S&P500 Index, through variables such as the Consumer Price Index and Gross Domestic Product (among others), while adjusting for the enactment of the Dodd-Frank Wall Street Reform Act, Gramm-Bliley-Leach Act, and the near-full repeal of the Glass-Steagall Act.
Recommended Citation
Straessle, Jacob and Neitling, Evan, "Incorporating Macroeconomic Indicators and the Baker-Wurgler Investor Sentiment Model to Forecast Market Returns" (2023). Linfield University Student Symposium: A Celebration of Scholarship and Creative Achievement. Event. Submission 43.
https://digitalcommons.linfield.edu/symposium/2023/all/43
Incorporating Macroeconomic Indicators and the Baker-Wurgler Investor Sentiment Model to Forecast Market Returns
The ability to predict rises and falls in financial markets has long been studied, with multiple models developed. This research seeks to develop a new model by extending the Baker-Wurgler Investor Sentiment Model to include macroeconomic variables while giving respect to differences in financial regulations. Through Ordinary Least Squares Regression, we seek to predict market returns, proxied by the S&P500 Index, through variables such as the Consumer Price Index and Gross Domestic Product (among others), while adjusting for the enactment of the Dodd-Frank Wall Street Reform Act, Gramm-Bliley-Leach Act, and the near-full repeal of the Glass-Steagall Act.
