Firm-level investor sentiment and corporate announcement returns

Nader Mahmoudi, Paul Docherty and Adrian Melia

Journal of Banking & Finance, 2022, vol. 144, issue C

Abstract: Behavioural models of investor behaviour propose that sentiment affects investors’ responses to corporate announcements. As beliefs can be cross-sectionally heterogeneous, firm-specific investor sentiment may differ from aggregate levels of investor sentiment. We provide empirical evidence about the explanatory power of both firm- and market-level investor sentiment for corporate announcement returns. We demonstrate empirically that firm-level investor sentiment has marginal explanatory power beyond market-level investor sentiment for corporate announcement returns, turnover and long-run reversals. Previous studies, which focus on market-level investor sentiment measures are likely to have under-stated the economic magnitude of the role that sentiment plays in corporate announcement returns.

Keywords: Firm-level investor sentiment; Market-level investor sentiment; Announcement returns; Turnover; Return reversals; Corporate announcements (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:144:y:2022:i:c:s0378426622001820

DOI: 10.1016/j.jbankfin.2022.106586

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