Investor Sentiment and the Near-Term Stock Market

33 Pages Posted: 13 Sep 2001

See all articles by Michael T. Cliff

Michael T. Cliff

Analysis Group

Gregory W. Brown

University of North Carolina (UNC) at Chapel Hill - Finance Area

Date Written: September 6, 2001

Abstract

We investigate investor sentiment and its relation to near-term stock market returns. We find that many commonly-cited indirect measures of sentiment are related to direct measures (surveys) of investor sentiment. However, past market returns are also an important determinant of sentiment. Although sentiment changes are strongly correlated with contemporaneous market returns, our tests show that sentiment has little predictive power for near- term future stock returns. Finally, our evidence does not support the conventional wisdom that sentiment primarily affects individual investors and small stocks.

Keywords: Behavioral finance, market efficiency

JEL Classification: G14

Suggested Citation

Cliff, Michael T. and Brown, Gregory W., Investor Sentiment and the Near-Term Stock Market (September 6, 2001). Available at SSRN: https://ssrn.com/abstract=282915 or http://dx.doi.org/10.2139/ssrn.282915

Michael T. Cliff

Analysis Group ( email )

800 17th St, N.W.
Suite 400
Washington, DC 20006
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(202) 530-2010 (Phone)

Gregory W. Brown (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Finance Area ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

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