Sentiment Metrics and Investor Demand
60 Pages Posted: 19 Dec 2014 Last revised: 10 Jan 2018
Date Written: January 9, 2018
Recent work suggests that sentiment traders shift from safer to more speculative stocks when sentiment increases. Exploiting these cross-sectional patterns and changes in share ownership, we find that sentiment metrics capture institutional rather than individual investors’ demand shocks. We investigate the underlying economic mechanisms and find that common institutional investment styles (e.g., risk management, momentum trading) explain a significant portion of the relation between institutions and sentiment.
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