Market response to investor sentiment

Jördis Hengelbrock, Erik Theissen and Christian Westheide

No 2011/02, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: This paper reconsiders the effect of investor sentiment on stock prices. Using survey-based sentiment indicators from Germany and the US we confirm previous findings of predictability at intermediate time horizons. The main contribution of our paper is that we also analyze the immediate price reaction to the publication of sentiment indicators. We find that the sign of the immediate price reaction is the same as that of the predictability at intermediate time horizons. This is consistent with sentiment being related to mispricing but is inconsistent with the alternative explanation that sentiment indicators provide information about future expected returns.

Keywords: Investor Sentiment; Event Study; Return Predictability (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Market Response to Investor Sentiment (2013)
Working Paper: Market response to investor sentiment (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:201102

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