 News-based sentiment and the value premiumFrancesco A. Fabozzi and Abdolreza Nazemi Journal of International Money and Finance, 2023, vol. 136, issue C Abstract: The literature has documented that growth stocks are long-duration assets that are sensitive to shocks to the market discount rate, and value stocks, being short-duration assets, are sensitive to shocks to future cash flows. However, there is an ongoing debate as to whether the co-movement of value stocks with other value stocks and growth stocks with other growth stocks is due to similarities in cash-flow characteristics (i.e., the fundamental-based view) or due to a time-varying discount rate applied to cash flows (i.e., the sentiment-based view). While most studies take a fundamental approach to answer this question, we provide a sentiment-based explanation of the value premium by using the sentiment of news articles pertaining to cash-flow risks and discount-rate shocks. Our findings are consistent with the literature for the main drivers of the value premium but in support of the sentiment-based view, not through a rejection of the fundamental view but through a novel method for quantifying the time-varying discount rate that investors apply to cash flows. Keywords: Asset pricing; Style investing; Value premium; News sentiment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:136:y:2023:i:c:s0261560623000657 DOI: 10.1016/j.jimonfin.2023.102864 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
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