Investor Emotions and Asset Prices

Shehub Bin Hasan, Alok Kumar and Richard Taffler

Financial Analysts Journal, 2025, vol. 81, issue 3, 122-149

Abstract: We develop a new emotion-based market-level sentiment indicator to measure the emotional state of the market. Using this aggregate series, we compute firm-level sensitivity to shifts in market-level emotions and find that stocks with high-emotion betas outperform low-emotion-beta firms. This performance differential is corrected in about six months. A trading strategy that takes a long (short) position in high- (low-) emotion beta stocks generates an annualized alpha of more than 6%. This evidence of emotion-based predictability is distinct from the known pricing effects of mood, traditional sentiment measures, economic and policy uncertainty, and tone.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/0015198X.2025.2509485 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:ufajxx:v:81:y:2025:i:3:p:122-149

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/ufaj20

DOI: 10.1080/0015198X.2025.2509485

Access Statistics for this article

Financial Analysts Journal is currently edited by Maryann Dupes

More articles in Financial Analysts Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().