27 Pages Posted: 26 Jun 2008 Last revised: 12 Jan 2009
Date Written: February 2007
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
Wang, John and Wurgler, Jeffrey and Baker, Malcolm P., How Does Investor Sentiment Affect the Cross-Section of Stock Returns? (February 2007). Available at SSRN: https://ssrn.com/abstract=1151310 or http://dx.doi.org/10.2139/ssrn.1151310
By Andrew Ang