Investor Sentiment as Conditioning Information in Asset Pricing

39 Pages Posted: 21 Aug 2008 Last revised: 20 Apr 2011

See all articles by Jerry C. Ho

Jerry C. Ho

Queensland University of Technology - School of Economics and Finance

Chi-Hsiou Daniel Hung

University of Glasgow - Adam Smith Business School

Date Written: August 21, 2008

Abstract

This paper assesses whether incorporating investor sentiment as conditioning information in asset pricing models helps capture the impacts of the size, value, liquidity and momentum effects on risk-adjusted returns of individual stocks. We use survey sentiment measures and a composite index as proxies for investor sentiment. In our conditional framework, the size effect becomes less important in the conditional CAPM and is no longer significant in all the other models examined. Furthermore, the conditional models often capture the value, liquidity and momentum effects.

Keywords: Anomalies, Asset pricing, Conditioning information, Sentiment

JEL Classification: G12, G14

Suggested Citation

Ho, Jerry Chienwei and Hung, Chi-Hsiou Daniel, Investor Sentiment as Conditioning Information in Asset Pricing (August 21, 2008). 21st Australasian Finance and Banking Conference 2008 Paper, Available at SSRN: https://ssrn.com/abstract=1243202 or http://dx.doi.org/10.2139/ssrn.1243202

Jerry Chienwei Ho

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

Chi-Hsiou Daniel Hung (Contact Author)

University of Glasgow - Adam Smith Business School ( email )

Gilbert Scott Building
University of Glasgow
Glasgow, Scotland G12 8QQ
United Kingdom

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