How Does Investor Sentiment Affect the Cross-Section of Stock Returns?
Journal of Investment Management, Vol. 6, No. 2, Second Quarter 2008
Posted: 12 May 2008 Last revised: 12 Jan 2009
Broad waves of investor sentiment should have larger impacts on securities that are more difficult to value and to arbitrage. Consistent with this intuition, we find that when an index of investor sentiment takes low values, small, young, high volatility, unprofitable, non-dividend-paying, extreme growth, and distressed stocks earn relatively higher subsequent returns. When sentiment is high, the aforementioned categories of stocks earn relatively lower subsequent returns.
Keywords: Sentiment, cross-section, prediction, index, behavioral
JEL Classification: G00
Suggested Citation: Suggested Citation