Sentiment Risk Premia In The Cross-Section of Global Equity

Roland Füss (), Massimo Guidolin and Christian Koeppel ()

No 1913, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: This paper introduces a new sentiment-augmented asset pricing model in order to provide a comprehensive understanding of the role this new type of risk factors. We find that news and social media search-based indicators are significantly related to excess returns of international equity indices. Adding sentiment factors to both classical and more recent pricing models leads to a significant increase in model performance. Following the Fama-MacBeth procedure, our modified pricing model obtains positive estimates of the risk premium for positive sentiment, while being negative for negative sentiment. Our results contribute to the explanation of the global cross-sectional of average excess returns and are robust for fundamental factors, momentum, idiosyncratic volatility, skewness, kurtosis, and international currencies.

Keywords: Asset pricing; behavioral finance; financial markets; investor sentiment; sentiment risk premium (search for similar items in EconPapers)
JEL-codes: C53 G12 G41 (search for similar items in EconPapers)
Pages: 72 pages
Date: 2019-08, Revised 2020-05
New Economics Papers: this item is included in nep-ore and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1913.pdf (application/pdf)

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:usg:sfwpfi:2019:13

Access Statistics for this paper

More papers in Working Papers on Finance from University of St. Gallen, School of Finance Contact information at EDIRC.
Bibliographic data for series maintained by ().