What Determines Manager and Investor Sentiment?
33 Pages Posted: 22 May 2020
Date Written: April 27, 2020
I find that Managerial and Investor Sentiment are determined by differing sets of economic variables, that share some common factors: Inflation, Liquidity and the Term Premium. Decomposing the Sentiment Indices, I find that the Investor Sentiment Model Component and the Managerial Sentiment Residual Component are primarily responsible for the predictive power of predicting cross-sectional stock returns that is much stronger than previous results. I present evidence that part of the predictive power is due to the components predicting priced market factors.
Keywords: Investor sentiment; Manager sentiment
JEL Classification: G02
Suggested Citation: Suggested Citation