The Long of It: Odds that Investor Sentiment Spuriously Predicts Anomaly Returns

Robert Stambaugh, Jianfeng Yu and Yu Yuan (yuanyu@mingshiim.com)

No 18231, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Extremely long odds accompany the chance that spurious-regression bias accounts for investor sentiment's observed role in stock-return anomalies. We replace investor sentiment with a simulated persistent series in regressions reported by Stambaugh, Yu and Yuan (2012), who find higher long-short anomaly profits following high sentiment, due entirely to the short leg. Among 200 million simulated regressors, we find none that support those conclusions as strongly as investor sentiment. The key is consistency across anomalies. Obtaining just the predicted signs for the regression coefficients across the 11 anomalies examined in the above study occurs only once for every 43 simulated regressors.

JEL-codes: C18 G12 G14 (search for similar items in EconPapers)
Date: 2012-07
New Economics Papers: this item is included in nep-ecm
Note: AP
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Citations: View citations in EconPapers (1)

Published as “The Long of It: Odds That Investor Sentiment Spuriously Predicts Anomaly Returns,” Journal of Financial Economics (2014): 613–619, with Jianfeng Yu and Yu Yuan.

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Journal Article: The long of it: Odds that investor sentiment spuriously predicts anomaly returns (2014)
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