Investor mood and the determinants of stock prices: an experimental analysis

Noel Harding, Wen He and Steven Cahan

Accounting and Finance, 2016, vol. 56, issue 2, 445-478

Abstract: type="main" xml:id="acfi12098-abs-0001">

We examine, in a controlled experimental setting, whether changes in investor mood cause changes in the determinants of stock prices. Our results show that a deterioration in mood, reflected in the negative dimensions of mood state, increases the level of risk aversion in male, but not female, investors. We find no evidence to suggest that a change in mood impacts on investors' forecasts of future earnings or future cash flows. By establishing the causal impact of a change in mood on risk aversion, our study provides support for archival research that relates various market anomalies to investor mood.

Date: 2016
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