A weekly sentiment index and the cross-section of stock returns

Hai-Chuan Xu and Wei-Xing Zhou

Finance Research Letters, 2018, vol. 27, issue C, 135-139

Abstract: Using the partial least squares approach, we construct an aligned sentiment index at weekly frequency. We investigate the predictive power of short-term investor sentiment on the characteristic-sorted portfolio returns. We find that sentiment changes have a positive impact on future stock returns in the Chinese A-share market. We further uncover that the predictive power of the sentiment index is the most significant for the small-size portfolio.

Keywords: Investor sentiment; Partial least squares; Return predictability (search for similar items in EconPapers)
JEL-codes: G11 G12 G17 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:27:y:2018:i:c:p:135-139

DOI: 10.1016/j.frl.2018.02.009

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