Forecasting the Market Returns And Portfolio Enhancement With Frequency‐Decomposed Institutional Investor Sentiment: Evidence From the Taiwan Futures Market
研究了台湾期货市场中机构投资者情绪变化对股指期货和股票市场收益的预测能力，发现长期情绪策略在牛市优于基准，中期情绪策略在熊市显著提升投资组合表现。
ABSTRACT This study examines the predictive power of changes in institutional investor sentiment in the Taiwan futures market for forecasting stock index futures and aggregate stock market returns. Using wavelet decomposition, the results show that long‐term sentiment changes outperform the buy‐and‐hold strategy, historical averages, undecomposed sentiment, and sentiment measures at other time scales in terms of predictive power and portfolio enhancement across the full sample. Additionally, a Markov‐switching model is applied to identify bull and bear market regimes and then to assess portfolio enhancement performance within each regime. The empirical findings reveal that, in bull markets, the long‐term sentiment‐based strategy outperforms the benchmarks mentioned above. In bear markets, a medium‐term sentiment‐based strategy delivers significant improvements in portfolio enhancement performance compared to the same aforementioned benchmarks. These results deepen our understanding of how institutional investor sentiment influences asset returns and offer valuable insights for tailoring portfolio management.