Investor Sentiment and Price Discrepancies between Common and Preferred Stocks in Korea

Heejin Yang and Doowon Ryu
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Heejin Yang: Department of Global Economics and Commerce, Dongguk University-Gyeongju, Gyeongju-si 38066, Korea
Doowon Ryu: College of General Education, Kookmin University, Seoul 02707, Korea

Sustainability, 2021, vol. 13, issue 10, 1-11

Abstract: We examine whether investor sentiment affects price discrepancies between preferred and common stocks, based on a sample of Korean firms that issue preferred stocks. While most research has focused on corporate finance features such as voting rights, we examine price discrepancies as a behavioral finance feature from a new perspective. Based on the investor sentiment index, as investor sentiment increases, price discrepancies between preferred and common stocks widen in the KOSPI market. These findings confirm that investor sentiment—not merely voting premiums, cash flow rights, and liquidity—is a significant factor in explaining price discrepancies between preferred and common stocks in Korea.

Keywords: investor sentiment; dual-class share; preferred stock; price discrepancies; emerging market (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
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