How Does the Change in Investor Sentiment over Time Affect Stock Returns?

A procedure confirms whether a return-factor correlation is anomalous or results from endogenous simultaneous-equations bias. The identification strategy sorts the cost of capital components for instruments. In the first stage, the initially found factors are regressed on cost instruments. In the second stage, a confirmed anomaly has predicted value significant in returns and exogenous. Taxes, depreciation and capital structure are strong instruments, affecting 1980–2017 quarterly U.S. stock returns. Size, value and profitability decisions are significant in instruments. Returns increase in fitted profits, but not small size. Actual and predicted values have weaker correlation with returns over time.

Download Full-text

The Impact of Investor Sentiment on Return of Different Industries in Pakistan

NICE Research Journal ◽

10.51239/nrjss.v0i0.14 ◽

2017 ◽

pp. 1-23

Author(s):

Sumayya Chughtai Et al.,

Keyword(s):

Stock Returns ◽

Principle Component Analysis ◽

Negative Relationship ◽

Investor Sentiment ◽

Differential Impact ◽

Future Period ◽

Market Sentiment ◽

Available Information ◽

The Impact ◽

The Relationship

We classify stocks in different industries to measure industrial sentiment based on principle component analysis in order to examine whether investor sentiment exerts a differential impact on stock returns across different industries. After having constructed industry-level sentiment indices we construct a composite investor sentiment index. Our results suggest that investor sentiment negatively affects current as well as future stock returns in Pakistan over the examined period. However, we find that the influence of investor sentiment varies substantially across different industries. We also find that the market sentiment index has a negative relationship with both current and future stock returns. We also show that the direction of the relationship between return and sentiment remains same for the current and future period. This indicates that investors overreact to the available information and mispricing exists for a prolonged time. Our results confirm that sentiment driven mispricing persists for upcoming time and stock markets are not fully efficient to adjust instantaneously.

Download Full-text

Information salience, investor sentiment, and stock returns: The case of British soccer betting

Journal of Corporate Finance ◽

10.1016/j.jcorpfin.2008.12.001 ◽

2009 ◽

Vol 15 (3) ◽

pp. 368-387 ◽

Cited By ~ 69

Author(s):

Frederic Palomino ◽

Luc Renneboog ◽

Chendi Zhang

Keyword(s):

Stock Returns ◽

Investor Sentiment ◽

Information Salience

Download Full-text

Investor Sentiment and the Cross-Section of Stock Returns

10.3386/w10449 ◽

2004 ◽

Cited By ~ 45

Author(s):

Malcolm Baker ◽

Jeffrey Wurgler

Keyword(s):

Stock Returns ◽

Cross Section ◽

Investor Sentiment ◽

The Cross

Download Full-text

Investor sentiment and the dispersion of stock returns: Evidence based on the social network of investors

International Review of Financial Analysis ◽

10.1016/j.irfa.2021.101910 ◽

2021 ◽

pp. 101910

Author(s):

Alya Al-Nasseri ◽

Faek Menla Ali ◽

Allan Tucker

Keyword(s):

Social Network ◽

Stock Returns ◽

Investor Sentiment ◽

Evidence Based ◽

The Social

Download Full-text

Investor Sentiment and Stock Returns

Handbook of Research on Behavioral Finance and Investment Strategies - Advances in Finance, Accounting, and Economics ◽

10.4018/978-1-4666-7484-4.ch019 ◽

2015 ◽

pp. 315-328

Author(s):

Serkan Yılmaz Kandır ◽

Veli Akel ◽

Murat Çetin

Keyword(s):

Stock Returns ◽

Investor Sentiment ◽

Consumer Confidence ◽

Cointegration Test ◽

Sample Period ◽

Monthly Data ◽

Out Of Sample ◽

Confidence Index ◽

The Relationship

In this chapter, the authors investigate the relationship between investor sentiment and stock returns in an out of sample market, namely Borsa Istanbul. The authors use the Consumer Confidence Index as an investor sentiment proxy, while utilizing BIST Second National Index as a measure of small capitalized stock returns. The sample period spans from January 2004 to May 2014. By using monthly data, the authors employ cointegration test and error–correction based Granger causality models. The authors' findings suggest that there is a long-term relationship between investor sentiment and stock returns in Borsa Istanbul. Moreover, a unidirectional causal relationship from investor sentiment to stock returns is also found.

Download Full-text