Investor Mood and the Determinants of Stock Prices: An Experimental Analysis
Accounting and Finance, Forthcoming
44 Pages Posted: 17 Mar 2011 Last revised: 7 Nov 2015
Date Written: September 25, 2014
We examine, in a controlled experimental setting, whether changes in investor mood cause changes in the determinants of stock prices. Our results show that a deterioration in mood, reflected in the negative dimensions of mood state, increases the level of risk aversion in male, but not female, investors. We find no evidence to suggest that a change in mood impacts on investors’ forecasts of future earnings or future cash flows. By establishing the causal impact of a change in mood on risk aversion, our study provides support for archival research that relates various market anomalies to investor mood.
Keywords: Investor mood; Stock prices; Risk aversion; Earnings forecasts; Experiment
JEL Classification: D03, G12, G14
Suggested Citation: Suggested Citation