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Measuring Investor Sentiment

Guofu Zhou ()
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Guofu Zhou: Olin Business School, Washington University in St. Louis, St. Louis, Missouri 63130, USA

Annual Review of Financial Economics, 2018, vol. 10, issue 1, 239-259

Abstract: Investor sentiment indicates how far an asset value deviates from its economic fundamentals. In this article, we review various measures of investor sentiment based on market, survey, and text and media data. There is ample evidence that sentiment can explain returns on stocks that are difficult to value and costly to arbitrage, such as unprofitable stocks, non-dividend-paying stocks, extreme growth stocks, and distressed stocks. However, much remains to be done. We discuss three issues for future research: aggregating measures over various sources and various time horizons, linking investor sentiment to technical analysis, and statistically modeling the evolution of investor sentiment.

Keywords: sentiment; investor optimism; investor survey; textual analysis; technical analysis; predictability; behavioral finance (search for similar items in EconPapers)
JEL-codes: C58 G12 G14 (search for similar items in EconPapers)
Date: 2018
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