Abobaker Al.Al. Hadood and Farid Irani
This paper considers the role of economic sentiment and economic policy uncertainty (both domestic and European) in explaining the changes in the contemporaneous and future travel…
Abstract
Purpose
This paper considers the role of economic sentiment and economic policy uncertainty (both domestic and European) in explaining the changes in the contemporaneous and future travel and leisure stock index returns in top European Union (EU) tourism destinations, namely, in France, Germany, Spain and the UK.
Design/methodology/approach
The authors conducted the ordinary least square (OLS) regression estimations to investigate the impact of changes in economic sentiment and economic policy uncertainty on travel and leisure stock returns. Furthermore, the authors used predictive regressions to determine whether economic sentiment and economic policy uncertainty are useful predictors over the short- or medium-term for travel and leisure stock returns.
Findings
Empirical results revealed that, in France and Spain, the changes in regional economic sentiments predominantly and positively affected travel and leisure stock index returns. Also, results indicated that changes in European economic sentiment have a strong positive effect on the future travel and leisure stock returns in Spain and the UK over the short run, while in France, changes in European economic policy uncertainty have a weak negative effect on the future travel and leisure stock returns over the medium-term.
Research limitations/implications
This paper provides valuable practical implications for investors who trade travel and leisure stocks. Traders can use economic sentiment and economic policy uncertainty to establish arbitrageur strategies.
Originality/value
This study is the first to examine the effects of economic sentiment and economic policy uncertainty (both domestic and European) on contemporaneous and future travel and leisure stock returns in a top European tourism destination.
Details
Keywords
Farid Irani, Abobaker Al.Al. Hadood, Salih Katircioglu and Setareh Katircioglu
This paper focuses on the role of sentiment and monetary policy (both domestic and the United States (US)) in explaining the changes in the Mexican tourism firms' stock returns…
Abstract
Purpose
This paper focuses on the role of sentiment and monetary policy (both domestic and the United States (US)) in explaining the changes in the Mexican tourism firms' stock returns for the period 1998M03–2019M12.
Design/methodology/approach
The authors conducted the ordinary least square regression estimations using various models to investigate the impact of sentiment and monetary policy changes on tourism firms' stock returns. Furthermore, to provide a robust check, the authors run all regression models based on the capital asset pricing model by regressing the excess returns of tourism firms' stocks on all independent variables.
Findings
Empirical findings reveal that the changes in Mexican consumer sentiment have a stronger positive effect on tourism firms' stock returns than Mexican business sentiment changes. However, the US consumer and business sentiment are irrelevant to tourism firms' stock returns. Moreover, this study’s results indicate that changes in the US interest rates positively influence tourism firms' stock returns. This study’s findings show that as the monetary divergence between Mexico and the US (differential real interest rates) widens, the lower is the tourism firms' stock returns.
Originality/value
This study is the first to extend the prior studies by examining the effects of sentiment and monetary policy (both domestic and US role) on Mexican tourism stock return.