Melancholia and Japanese stock returns – 2003 to 2012

Joyce Khuu, Robert B. Durand and Lee Smales

Pacific-Basin Finance Journal, 2016, vol. 40, issue PB, 424-437

Abstract: Japan's “lost decades” challenge a central tenet of finance, namely a positive relationship between risk and expected return. We present evidence that Japan's dismal returns are a function of sentiment both at the aggregate market and individual firm level. Utilizing a text-based measure of news sentiment (Thomson Reuters News Analytics) to proxy for investor sentiment, we find that sentiment is predominately negative during our sample period (2003 to 2012) and is associated with negative returns. We also find that the effect of news sentiment is greatest for smaller firms.

Keywords: Japan; Behavioral finance; Sentiment; Bear markets; News Analytics (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:40:y:2016:i:pb:p:424-437

DOI: 10.1016/j.pacfin.2016.05.011

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