Do Investors Care About Sentiment?

Posted: 25 Aug 1998

See all articles by Edwin J. Elton

Edwin J. Elton

New York University (NYU) - Department of Finance

Jeffrey A. Busse

Emory University - Department of Finance

Martin J. Gruber

New York University (NYU) - Department of Finance

Abstract

Results of recent research indicate small investor sentiment, as measured by the change in the discount on closed-end funds, is an important factor in the return-generating process for common stocks. We find no evidence of it being an important factor in the return-generating process. We next examine its impact on expected returns and whether one set of firms with high sensitivity to this factor, closed-end funds, offers, and can be expected to offer a higher expected return. Our findings do not support small investor sentiment as a priced factor, either in common stocks or closed-end funds.

JEL Classification: G12, G14

Suggested Citation

Elton, Edwin J. and Busse, Jeffrey A. and Gruber, Martin J., Do Investors Care About Sentiment?. Journal of Business, October 1998, Vol. 71, No. 4. Available at SSRN: https://ssrn.com/abstract=112552

Edwin J. Elton (Contact Author)

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0361 (Phone)
212-995-4233 (Fax)

Jeffrey A. Busse

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States
404-727-0160 (Phone)
404-727-5238 (Fax)

Martin J. Gruber

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0333 (Phone)
212-995-4233 (Fax)

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