A Model of Investor Sentiment

Nicholas Barberis, Andrei Shleifer and Robert Vishny

No 5926, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Recent empirical research in finance has uncovered two families of pervasive regularities: underreaction of stock prices to news such as earnings announcements; and overreaction of stock prices to a series of good or bad news. In this paper, we present a parsimonious model of investor sentiment that is, of how investors form beliefs that is consistent with the empirical findings. The model is based on psychological evidence and produces both underreaction and overreaction for a wide range of parameter values.

JEL-codes: E (search for similar items in EconPapers)
Date: 1997-02
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Published as Journal of Financial Economics, Vol. 49 (1998): 307-343.

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Journal Article: A model of investor sentiment (1998)
Working Paper: A Model of Investor Sentiment (1998)
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