Investor sentiment, information and asset pricing model

Chunpeng Yang and Jinfang Li

Economic Modelling, 2013, vol. 35, issue C, 436-442

Abstract: We present an asset pricing model with investor sentiment and information, which shows that the investor sentiment has a systematic and significant impact on the asset price. The equilibrium price's rational term drives the asset price to the rational, and the sentiment term leads to the asset price deviating from it. In our model, the proportion of sentiment investors and the information quality could amplify the sentiment shock on the asset price. Finally, the information is fully incorporated into prices when sentiment investors learn from prices. The model could offer a partial explanation of some financial anomalies: price bubbles, high volatility, asset prices' momentum effect and reversal effect.

Keywords: Investor sentiment; Asset pricing model; Financial anomalies; Market efficiency (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:35:y:2013:i:c:p:436-442

DOI: 10.1016/j.econmod.2013.07.015

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