earticle

영어

We construct sentiment index with eight economic variables reflecting investor sentiment. We use kalman filter and principal component analysis to extract common factor of those variables. Two sentiment indices are similar in broad trend, but different in detailed scale. We conduct analysis with two constructed sentiment indices to investigate the relationship with two sentiment indices and the bond market risk is similar. In order to assess the relationship between investor sentiment and risk premium of bond, we conduct VAR analysis with sentiment, term premium, default premium and convexity. VAR results suggest there are significant relationships with sentiment and risk premium of bond.