Abstract

http://ssrn.com/abstract=1567616
 
 

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The Short of It: Investor Sentiment and Anomalies


Robert F. Stambaugh


University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Jianfeng Yu


University of Minnesota

Yu Yuan


Shanghai Advanced Institute of Finance; University of Pennsylvania - Wharton Financial Institutions Center

October 13, 2011

Journal of Financial Economics (JFE), Vol. 104, pp 288-302, May 2012
AFA 2012 Chicago Meetings Paper

Abstract:     
This study explores the role of investor sentiment in a broad set of anomalies in cross-sectional stock returns. We consider a setting where the presence of market-wide sentiment is combined with the argument that overpricing should be more prevalent than underpricing, due to short-sale impediments. Long-short strategies that exploit the anomalies exhibit profits consistent with this setting. First, each anomaly is stronger - its long-short strategy is more profitable - following high levels of sentiment. Second, the short leg of each strategy is more profitable following high sentiment. Finally, sentiment exhibits no relation to returns on the long legs of the strategies.

Number of Pages in PDF File: 37

Keywords: Investor Sentiment, Anomaly, Short-sale Constraint

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Date posted: March 15, 2010 ; Last revised: March 11, 2012

Suggested Citation

Stambaugh, Robert F. and Yu, Jianfeng and Yuan, Yu, The Short of It: Investor Sentiment and Anomalies (October 13, 2011). Journal of Financial Economics (JFE), Vol. 104, pp 288-302, May 2012; AFA 2012 Chicago Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1567616

Contact Information

Robert F. Stambaugh
University of Pennsylvania - The Wharton School ( email )
The Wharton School, Finance Department
University of Pennsylvania
Philadelphia, PA 19104-6367
United States
215-898-5734 (Phone)
215-898-6200 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Jianfeng Yu (Contact Author)
University of Minnesota ( email )
321 19th Avenue
Suite 3-122
Minneapolis, MN 55455
United States
HOME PAGE: http://users.cla.umn.edu/~jianfeng/
Yu Yuan
Shanghai Advanced Institute of Finance ( email )
Shanghai
China
HOME PAGE: http://https://finance.wharton.upenn.edu/~yuanyu
University of Pennsylvania - Wharton Financial Institutions Center ( email )
3733 Spruce Street
Philadelphia, PA 19104-6374
United States
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