Abstract

http://ssrn.com/abstract=2103302
 
 

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The Long of It: Odds That Investor Sentiment Spuriously Predicts Anomaly Returns


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

February 16, 2014

Journal of Financial Economics (JFE) 114, December 2014, pp 613-619.

Abstract:     
Extremely long odds accompany the chance that spurious-regression bias accounts for investor sentiment's observed role in stock-return anomalies. We replace investor sentiment with a simulated persistent series in regressions reported by Stambaugh, Yu and Yuan (2012), who find higher long-short anomaly profits following high sentiment, due entirely to the short leg. Among 200 million simulated regressors, we find none that support those conclusions as strongly as investor sentiment. The key is consistency across anomalies. Obtaining just the predicted signs for the regression coefficients across the 11 anomalies examined in the above study occurs only once for every 43 simulated regressors.

Number of Pages in PDF File: 15

Keywords: investor sentiment, anomalies, spurious regressors

JEL Classification: G12, G14, C18

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Date posted: July 11, 2012 ; Last revised: November 6, 2014

Suggested Citation

Stambaugh, Robert F. and Yu, Jianfeng and Yuan, Yu, The Long of It: Odds That Investor Sentiment Spuriously Predicts Anomaly Returns (February 16, 2014). Journal of Financial Economics (JFE) 114, December 2014, pp 613-619. . Available at SSRN: http://ssrn.com/abstract=2103302 or http://dx.doi.org/10.2139/ssrn.2103302

Contact Information

Robert F. Stambaugh (Contact Author)
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
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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