A Model of Investor Sentiment

Posted: 19 Feb 1997

See all articles by Nicholas Barberis

Nicholas Barberis

Yale School of Management; National Bureau of Economic Research (NBER)

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Robert W. Vishny

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: Undated

Abstract

Recent empirical research inn finance has uncovered two families of pervasive regularities: underreaction of stock prices to news such as earnings announcements; and overreaction of stock prices to a series of good or bad news. In this paper, we present a parsimonious model of investor sentiment - that is, of how investors form beliefs - that is consistent with the empirical findings. The model is based on psychological evidence and produces both underreaction and overreaction for a wide range of parameter values.

JEL Classification: G12, G14

Suggested Citation

Barberis, Nicholas and Shleifer, Andrei and Vishny, Robert W., A Model of Investor Sentiment (Undated). Available at SSRN: https://ssrn.com/abstract=8119

Nicholas Barberis (Contact Author)

Yale School of Management ( email )

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Andrei Shleifer

Harvard University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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European Corporate Governance Institute (ECGI)

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Robert W. Vishny

University of Chicago - Booth School of Business ( email )

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United States
312-702-2522 (Phone)
312-702-0118 (Fax)

National Bureau of Economic Research (NBER)

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