Abstract

http://ssrn.com/abstract=1107619
 
 

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Investor Sentiment and Stock Market Response to Corporate News


Srinivasan Sankaraguruswamy


National University of Singapore (NUS) - Department of Accounting

G. Mujtaba Mian


Hong Kong Polytechnic University

June 2008


Abstract:     
We examine whether market-wide investor sentiment influences the stock price response to firm-specific news. We use the recently developed measure of investor sentiment by Baker and Wurgler (2006, 2007) and focus on the stock price response to earnings announcements. Our results indicate that the prevailing sentiment sways stock price response to news in the direction of the sentiment - the positive stock price response to good news increases with sentiment, whereas the negative stock price response to bad news decreases with sentiment. The influence of sentiment on the stock price response is especially pronounced for small stocks, young stocks, volatile stocks, non-dividend paying stocks and distressed stocks. We find that sentiment also impacts the stock price response to dividend changes and stock split announcements.

Number of Pages in PDF File: 38

Keywords: Investor Sentiment, Corporate News, Event Studies, Behavioral Finance

JEL Classification: D14, D21, G24

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Date posted: March 25, 2008 ; Last revised: July 8, 2008

Suggested Citation

Sankaraguruswamy, Srinivasan and Mian, G. Mujtaba, Investor Sentiment and Stock Market Response to Corporate News (June 2008). Available at SSRN: http://ssrn.com/abstract=1107619 or http://dx.doi.org/10.2139/ssrn.1107619

Contact Information

Srinivasan Sankaraguruswamy
National University of Singapore (NUS) - Department of Accounting ( email )
1 Business Link
Singapore, 117592
Singapore
+65 6874 4473 (Phone)
+65 6779 2083 (Fax)
G. Mujtaba Mian (Contact Author)
Hong Kong Polytechnic University ( email )
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