Abstract

https://ssrn.com/abstract=1294472
 
 

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Citations (131)



 


 



Individual Investor Sentiment and Stock Returns


Ron Kaniel


University of Rochester - Simon Business School; CEPR

Gideon Saar


Cornell University - Samuel Curtis Johnson Graduate School of Management

Sheridan Titman


University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

September 2004

NYU Working Paper No. FIN-04-023

Abstract:     
This paper investigates a unique dataset that enables us to determine the aggregate buy and sell volume of individual investors for a large cross-section of NYSE stocks. We find that individuals trade as if they are contrarians, and that the stocks that individuals buy exhibit positive excess returns in the following month. These patterns are consistent with the idea that risk-averse individuals provide liquidity to meet institutional demand for immediacy. We further examine the relation between individual investor sentiment and short-horizon (weekly) return reversals that have been documented in the literature. Our results reveal that individual investor sentiment predicts future returns, and that the information content of investor sentiment is distinct from that of past returns or past volume. Furthermore, the trading of individuals predicts weekly returns in the post-2000 era for stocks of all sizes, while past return seems to have lost its predictive power for all but small stocks over the same time period. Lastly, we note that there is very little cross-sectional correlation of our individual sentiment measure across the stocks in our sample.

Number of Pages in PDF File: 45


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Date posted: November 3, 2008  

Suggested Citation

Kaniel, Ron and Saar, Gideon and Titman, Sheridan, Individual Investor Sentiment and Stock Returns (September 2004). NYU Working Paper No. FIN-04-023. Available at SSRN: https://ssrn.com/abstract=1294472

Contact Information

Ron Kaniel (Contact Author)
University of Rochester - Simon Business School ( email )
Rochester, NY 14627
United States
HOME PAGE: http://rkaniel.simon.rochester.edu

CEPR ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Gideon Saar
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
431 Sage Hall
Ithaca, NY 14853
United States
607-255-7484 (Phone)
607-255-5993 (Fax)
HOME PAGE: https://www.johnson.cornell.edu/Faculty-And-Research/Profile?id=gs25

Sheridan Titman
University of Texas at Austin - Department of Finance ( email )
Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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