Abstract

http://ssrn.com/abstract=2146320
 


 



Booms, Busts, and Sentiment: The Impact on Price Discovery


Jeffrey Coulton


Australian School of Business; Centre for International Finance and Regulation (CIFR)

Tami Dinh Thi


University of St. Gallen, Institute of Accounting, Control, Auditing

Andrew B. Jackson


University of New South Wales (UNSW) - School of Accounting

September 13, 2012

UNSW Australian School of Business Research Paper No. 2012 ACCT 09

Abstract:     
We study how sentiment affects the speed with which prices reflect information. We find that deviations from a steady level of economy-wide sentiment are associated with more timely price discovery. We also find that in general, price discovery is more timely for firms with greater sensitivity to economy-wide sentiment, as measured by a sentiment beta. However, this result does not hold when analyzing economy-wide sentiment and a firm's sentiment beta simultaneously. During bust periods, high sentiment beta stocks have lower timeliness. Our research sheds light on the price formation process when sentiment deviates from normal levels. In particular, our results suggest that a firm's sentiment beta is sensitive to changes in an exogenous economy-wide sentiment.

Number of Pages in PDF File: 32

Keywords: Timeliness, Price Discovery, Sentiment, Sentiment Beta

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Date posted: September 14, 2012  

Suggested Citation

Coulton, Jeffrey and Dinh Thi, Tami and Jackson, Andrew B., Booms, Busts, and Sentiment: The Impact on Price Discovery (September 13, 2012). UNSW Australian School of Business Research Paper No. 2012 ACCT 09. Available at SSRN: http://ssrn.com/abstract=2146320 or http://dx.doi.org/10.2139/ssrn.2146320

Contact Information

Jeffrey J. Coulton
Australian School of Business ( email )
Sydney, NSW 2052
Australia
+61293855811 (Phone)
+93855925 (Fax)

Centre for International Finance and Regulation (CIFR) ( email )
Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Tami Dinh Thi
University of St. Gallen, Institute of Accounting, Control, Auditing ( email )
St. Gallen, 9000
Switzerland
HOME PAGE: http://www.aca.unisg.ch/en
Andrew B. Jackson (Contact Author)
University of New South Wales (UNSW) - School of Accounting ( email )
Sydney, NSW 2052
Australia
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