EconPapers    
Economics at your fingertips  
 

Investor Sentiment in the Stock Market

Malcolm Baker and Jeffrey Wurgler ()

No 13189, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Real investors and markets are too complicated to be neatly summarized by a few selected biases and trading frictions. The "top down" approach to behavioral finance focuses on the measurement of reduced form, aggregate sentiment and traces its effects to stock returns. It builds on the two broader and more irrefutable assumptions of behavioral finance -- sentiment and the limits to arbitrage -- to explain which stocks are likely to be most affected by sentiment. In particular, stocks of low capitalization, younger, unprofitable, high volatility, non-dividend paying, growth companies, or stocks of firms in financial distress, are likely to be disproportionately sensitive to broad waves of investor sentiment. We review the theoretical and empirical evidence for these predictions.

JEL-codes: E32 G11 G12 G14 (search for similar items in EconPapers)
Date: 2007-06
New Economics Papers: this item is included in nep-mac and nep-rmg
Note: AP CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (693) Track citations by RSS feed

Published as Malcolm Baker & Jeffrey Wurgler, 2007. "Investor Sentiment in the Stock Market," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 129-152, Spring.

Downloads: (external link)
http://www.nber.org/papers/w13189.pdf (application/pdf)

Related works:
Journal Article: Investor Sentiment in the Stock Market (2007) Downloads
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:nbr:nberwo:13189

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w13189

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2021-06-10
Handle: RePEc:nbr:nberwo:13189