Investor Sentiment in the Stock Market

23 Pages Posted: 15 Dec 2011

See all articles by Malcolm P. Baker

Malcolm P. Baker

Harvard Business School; National Bureau of Economic Research (NBER)

Jeffrey Wurgler

NYU Stern School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 4 versions of this paper

Date Written: December 2011

Abstract

The history of the stock market is full of events striking enough to earn their own names: the Great Crash of 1929, the ’Tronics Boom of the early 1960s, the Go-Go Years of the late 1960s, the Nifty Fifty bubble of the early 1970s, the Black Monday crash of October 1987, and the Internet or Dot.com bubble of the 1990s. Each of these events refers to a dramatic level or change in stock prices that seems to defy explanation. The standard finance model, in which unemotional investors always force capital market prices to equal the rational present value of expected future cash flows, has considerable difficulty fitting these patterns. Researchers in behavioral finance have therefore been working to augment the standard model with an alternative model built on two basic assumptions.

Suggested Citation

Baker, Malcolm P. and Wurgler, Jeffrey A., Investor Sentiment in the Stock Market (December 2011). NYU Working Paper No. 2451/31359; NYU Working Paper No. FIN-11-026. Available at SSRN: https://ssrn.com/abstract=1972797

Malcolm P. Baker

Harvard Business School ( email )

Boston, MA 02163
United States
617-495-6566 (Phone)

HOME PAGE: http://www.people.hbs.edu/mbaker

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jeffrey A. Wurgler (Contact Author)

NYU Stern School of Business ( email )

Stern School of Business
44 West 4th Street, Suite 9-190
New York, NY 10012-1126
United States
212-998-0367 (Phone)
212-995-4233 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~jwurgler/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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