Sentiment about Stock Prices

41 Pages Posted: 23 Jun 2020

See all articles by Pei Kuang

Pei Kuang

University of Birmingham

Li Tang

University of Essex

Date Written: February 13, 2020


The paper develops and estimates a stock pricing model with sentiment shocks to stock price forecasts and learning about stock prices by investors which replicates several survey evidence on stock price forecasts along with a standard set of asset pricing facts for the United States. A unique feature is that stock price forecasts in the model are not anchored by (or not co-integrated with) forecasts of fundamentals as in survey data. The model suggests about two-thirds of the fluctuations of stock price-dividend ratios are driven by shifting investors’ expectations as a result of the dynamic interaction between the sentiment shocks and investors’ learning.

Keywords: Survey Forecast, Sentiment, Learning, Co-integration, Asset Prices

JEL Classification: D84, G12, G17, G41

Suggested Citation

Kuang, Pei and Tang, Li, Sentiment about Stock Prices (February 13, 2020). Available at SSRN: or

Pei Kuang

University of Birmingham ( email )

Edgbaston, Birmingham B15 2TT
United Kingdom

Li Tang (Contact Author)

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics