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http://ssrn.com/abstract=1548602
 
 

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Characteristics, Affect, and Stock Returns


Meir Statman


Santa Clara University - Department of Finance


SCU Leavey School of Business Research Paper No. 10-06

Abstract:     
Why were the returns of stocks with low book-to-market ratios and high market capitalization's lower, on average, than the returns of stocks with high book-to-market ratios and low market capitalization's? In this paper we pit the characteristics hypothesis against the affect hypothesis. The characteristics hypothesis says that some characteristics, such as low book-to-market ratio and high market capitalization, are associated with high future stock returns in typical investors’ minds. The affect hypothesis says that the names of some companies elicit positive affect which is associated with high future stock returns in typical investors’ minds. We find, through experiments, that the evidence is more consistent with the affect hypothesis than with the characteristics hypothesis.

Number of Pages in PDF File: 24

Keywords: behavioral finance, investor behavior, affect hypothesis, efficient market

JEL Classification: G00, G10, G14

working papers series


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Date posted: February 7, 2010  

Suggested Citation

Statman, Meir, Characteristics, Affect, and Stock Returns. SCU Leavey School of Business Research Paper No. 10-06. Available at SSRN: http://ssrn.com/abstract=1548602 or http://dx.doi.org/10.2139/ssrn.1548602

Contact Information

Meir Statman (Contact Author)
Santa Clara University - Department of Finance ( email )
500 El Camino Real
Santa Clara, CA 95053
United States
408-554-4147 (Phone)
408-554-4029 (Fax)
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