Investor Psychological and Behavioral Bias: Do High Sentiment and Momentum Exist in the China Stock Market?

Chun-An Li () and Chih-Cheng Yeh ()
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Chun-An Li: Department of Finance, Yunlin University of Science and Technology, No. 123, Sec. 3, University Road, Touliu 640, Taiwan
Chih-Cheng Yeh: Department of Business Administration, Ling Tung University, No. 1, Lingtung Road, Taichung 408, Taiwan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2011, vol. 14, issue 03, 429-448

Abstract: By using the relationship between high sentiment and momentum, the main purpose of this paper is to investigate if psychological biases of investors have an influence on behavioral biases. We find that in the China stock market, high sentiment of loser groups is correlated with contributors of momentum profits, while high sentiment of winner groups is correlated with contributors of contrarian returns. Further analysis indicates that, the higher the investor psychological bias is, the greater the momentum return will become. Winners/losers that are most sensitive to sentiment and having the longest duration of being kept under the situation will result in higher returns.

Keywords: Momentum; investor sentiment; psychological bias; behavioral bias (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2011
References: View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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DOI: 10.1142/S0219091511002305

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