Can fund sentiment beta predict future performance?

Qiang Bu () and Odd J. Stalebrink
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Qiang Bu: Pennsylvania State University-Harrisburg
Odd J. Stalebrink: Pennsylvania State University-Harrisburg

Journal of Asset Management, 2020, vol. 21, issue 6, No 4, 524-534

Abstract: Abstract Using both actual and bootstrapped fund samples, this paper examines whether fund sentiment beta (FSB) can be used to predict future fund performance, whether FSB exhibits persistence across time periods, and whether FSB affects fund selectivity. We find that FSB has no significant effect on either current or subsequent fund performance and that it does not exhibit any persistence across time. Also, we find no evidence of a relationship between FSB and fund selectivity. Contrary to prior research, these findings suggest that an FSB-based strategy is unlikely to be a profitable strategy for fund managers.

Keywords: Fund sentiment beta; BW index; Persistence; Selectivity (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1057/s41260-020-00182-1

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