How Does Investor Sentiment Affect the Cross-Section of Stock Returns?
27 Pages Posted: 26 Jun 2008 Last revised: 11 Aug 2008
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How Does Investor Sentiment Affect the Cross-Section of Stock Returns?
How Does Investor Sentiment Affect the Cross-Section of Stock Returns?
Date Written: February 2007
Abstract
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
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