Chasing investor sentiment in stock market

Chunpeng Yang and Huihui Wu

The North American Journal of Economics and Finance, 2019, vol. 50, issue C

Abstract: In this paper, we present a sentiment asset pricing model with the Chasers, who believe investor sentiment has significant impact on asset pricing and tend to chase investor sentiment, optimally inferring investor sentiment from asset price. We find that the impact of investor sentiment on asset price depends not only on the number of the Sentiment investors but also on the number of the Chasers; and the Chasers can amplify the impact of investor sentiment on asset price. If investor sentiment is optimistic, the Chasers would increase stock price; and if investor sentiment is pessimistic, the Chasers would decrease stock price. Moreover, we demonstrate that the Chasers can also increase stock price volatility. The model could offer a partial explanation to the phenomenon of overvaluation, undervaluation and excess volatility.

Keywords: Chasers; Investor sentiment; Asset pricing (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:50:y:2019:i:c:s1062940818303243

DOI: 10.1016/j.najef.2019.04.018

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