Required:

  1. Discuss the theoretical underpinnings for empirical findings of Yu and Yuan (2011).                                                                                 [6 marks]
  2. Suppose that you decide to extend the US evidence from Yu and Yuan (2011) to another market. Select a market and motivate your selection.                                                 [8 marks]
  3. Critically review related literature, and summarise and evaluate approaches to construct proxies for investor sentiment.                                                                                 [12 marks]
  4. Determine a proxy for investor sentiment in your selected market, and elaborate motivation for your selection.                                                                                 [8 marks]
  5. Present descriptive statistics of (i) market returns of the selected market and (ii) investor sentiment.                                                                                 [15 marks]
  6. Select one method to filter conditional volatility of market returns, and present descriptive statistics of conditional volatility.                                                                                                                                                                                                                               [15 marks]
  7. Examine (i) the relation between market returns and investor sentiment, and (ii) the relation between market returns and conditional volatility. Discuss potential limitations of your work.                                                                 [36 marks]