Download or read book Investor Sentiment as Conditioning Information in Asset Pricing written by Jerry C. Ho and published by . This book was released on 2011 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses whether incorporating investor sentiment as conditioning information in asset pricing models helps capture the impacts of the size, value, liquidity and momentum effects on risk-adjusted returns of individual stocks. We use survey sentiment measures and a composite index as proxies for investor sentiment. In our conditional framework, the size effect becomes less important in the conditional CAPM and is no longer significant in all the other models examined. Furthermore, the conditional models often capture the value, liquidity and momentum effects.

Download or read book The Role of Investor Sentiment in Asset Pricing written by Chien-Wei Ho and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates various roles that investor sentiment may play in asset pricing. The empirical analysis consists of three main parts based on the role of investor sentiment in the stock markets. The first part discusses the role of investor sentiment as conditioning information. It aims to examine its ability to explain the dynamic nature of the expected returns for individual stocks and its explanatory power capture the financial market anomalies such as the size, value, liquidity, and effects. The second part focuses on the role of investor sentiment as a risk factor. The purpose is to construct a risk factor on the basis of investor sentiment and test whether this proposed sentiment factor is priced and helps to explain the aforementioned financial market anomalies. The third part explores the role of investor sentiment in different international stock markets. It attempts to assess the extent to which investor sentiment affects the stock market volatility and returns of different regions. The results suggest that investor sentiment exhibits explanatory power for cross section of stock returns in the U.S. market. Acting as conditioning information or a risk factor, investor sentiment can generally capture the size and value effects. Furthermore, it can also capture the momentum effect under certain model specifications. The thesis shows that investors require compensation for bearing noise traders; in other words, investor sentiment is a priced factor. At the market level, the impacts of investor sentiment on stock volatility and returns vary across countries. For some countries investor sentiment affects both volatility and returns while for the others investor sentiment has less influence on stock price behaviour. Overall, the findings of the thesis provide empirical evidence that overlooking the role of investor sentiment in classical finance theory could lead to an imperfect picture of describing the stock price behaviour.

Download or read book Essays on Asset Pricing Implications of Investor Sentiment written by and published by . This book was released on 2012 with total page 156 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Media Sentiment and International Asset Prices written by Samuel P. Fraiberger and published by International Monetary Fund. This book was released on 2018-12-10 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We assess the impact of media sentiment on international equity prices using more than 4.5 million Reuters articles published across the globe between 1991 and 2015. News sentiment robustly predicts daily returns in both advanced and emerging markets, even after controlling for known determinants of stock prices. But not all news-sentiment is alike. A local (country-specific) increase in news optimism (pessimism) predicts a small and transitory increase (decrease) in local returns. By contrast, changes in global news sentiment have a larger impact on equity returns around the world, which does not reverse in the short run. We also find evidence that news sentiment affects mainly foreign – rather than local – investors: although local news optimism attracts international equity flows for a few days, global news optimism generates a permanent foreign equity inflow. Our results confirm the value of media content in capturing investor sentiment.

Download or read book Investor Sentiment and Asset Pricing written by Sze Nie Ung and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Investor Sentiment in Asset Pricing Models written by Szymon Lis and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Trading on Sentiment written by Richard L. Peterson and published by John Wiley & Sons. This book was released on 2016-03-21 with total page 374 pages. Available in PDF, EPUB and Kindle. Book excerpt: In his debut book on trading psychology, Inside the Investor’s Brain, Richard Peterson demonstrated how managing emotions helps top investors outperform. Now, in Trading on Sentiment, he takes you inside the science of crowd psychology and demonstrates that not only do price patterns exist, but the most predictable ones are rooted in our shared human nature. Peterson’s team developed text analysis engines to mine data - topics, beliefs, and emotions - from social media. Based on that data, they put together a market-neutral social media-based hedge fund that beat the S&P 500 by more than twenty-four percent—through the 2008 financial crisis. In this groundbreaking guide, he shows you how they did it and why it worked. Applying algorithms to social media data opened up an unprecedented world of insight into the elusive patterns of investor sentiment driving repeating market moves. Inside, you gain a privileged look at the media content that moves investors, along with time-tested techniques to make the smart moves—even when it doesn’t feel right. This book digs underneath technicals and fundamentals to explain the primary mover of market prices - the global information flow and how investors react to it. It provides the expert guidance you need to develop a competitive edge, manage risk, and overcome our sometimes-flawed human nature. Learn how traders are using sentiment analysis and statistical tools to extract value from media data in order to: Foresee important price moves using an understanding of how investors process news. Make more profitable investment decisions by identifying when prices are trending, when trends are turning, and when sharp market moves are likely to reverse. Use media sentiment to improve value and momentum investing returns. Avoid the pitfalls of unique price patterns found in commodities, currencies, and during speculative bubbles Trading on Sentiment deepens your understanding of markets and supplies you with the tools and techniques to beat global markets— whether they’re going up, down, or sideways.

Download or read book Investor Sentiment and Asset Pricing written by Lawrence Olorungbohunmi and published by . This book was released on 2019 with total page 5 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides insight view of an investor mind dueling on proving the fact that a series of event in a company could cause a dramatic move on to practitioners who wish to forecast market returns based on event occurrences.Using 12 years (2006 to 2018) historical data of Foxconn Company covering all the death occurrences in the company over the past years to predict it impacts on the company stock, data's are collected from yahoo finance. This study used an event study and Dummy variables methodology to test whether or not sentiment impacted market returns.

Download or read book Exploiting Investor Sentiment for Portfolio Optimization written by Nicolas Banholzer and published by GRIN Verlag. This book was released on 2018-09-17 with total page 118 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2018 in the subject Mathematics - Statistics, grade: 1.0, University of Augsburg (Wirtschaftswissenschaftliche Fakultät, Lehrstuhl für Statistik), language: English, abstract: In efficient financial markets, there is no room for sentimental investors. Any new information would be immediately absorbed and any mispricing immediately corrected by the forces of rational arbitrageurs doing the maths with the fundamentals. But why should financial markets be different from any other market where humans interact and are subject to psychological biases? There is strong empirical evidence that investor sentiment, broadly defined as "a belief about future cash flows and investment risks that is not justified by the facts at hand", plays an important role in financial markets. It can lead to significant overpricing/underpricing, particularly of assets prone to subjective valuations. With limits/risks to arbitrage in the short term, prices rather correct over the medium to long term as sentimental beliefs mean-revert. Building on the studies by Baker and Wurgler 2006 and Baker, Wurgler, and Y. Yuan 2012, measures of investor sentiment for international markets are constructed. Using the Copula Opinion Pooling approach developed by Attilio Meucci, this thesis shows how to incorporate these sentiment measures into portfolio optimization. Thereby, a sentiment-based trading strategy that exploits the medium-term reversal effect of sentiment is developed and empirically tested. The results are promising as they provide strong evidence that sentiment contains beneficial information that should not be neglected by quantitative portfolio managers.

Download or read book Sentiment Measures and Asset Pricing written by Luigi Croce and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis builds on the results of empirical behavioral finance research to shed light on the concept of market sentiment, and to identify and analyze the proxies best suited to capture its effect on asset prices. Market sentiment refers to an irrational behavior of investors, whose causes are divided by behavioral finance literature into two broad categories: biases in expectations' formation and risk preferences not in line with the maxims of expected utility theory. Each proxy of market sentiment is then analyzed considering its ability to capture these two facets of investors' deviations from rationality. No uncontroversial proxy of market sentiment exists; however, it appears that certain classes of proxies are better suited to capture investors' biases in expectations' formation and other better capture changing levels of investors' risk attitude. This master thesis then builds on the conclusions of its initial analysis to investigate whether sentiment could ameliorate the performance of asset pricing models. Traditional asset pricing models, such as the Charart four-factors model, are founded on the idea that asset returns depend on fundamental asset characteristics and should account for observed repeated mispricing in asset markets. Sentiment, interpreted as investors' biases in expectations' formation and measured through the news'-based Ravenpack index, can be interpreted as a repeated mispricing and tested as an additional risk factor to a Charart four-factor model. Alternatively, sentiment, considered as changing levels of investors' risk attitude and measured either by the Baker-Wurgler Index or by the University of Michigan Consumer Sentiment Index, can influence factors' risk premia and is tested as an explanatory variable of risk-premia time-series. Results show that sentiment retains explanatory power as an additional risk factor during the 2000 to 2009 period in the US stock market, and that it provides sign.

Download or read book A Behavioral Approach to Asset Pricing written by Hersh Shefrin and published by Elsevier. This book was released on 2008-05-19 with total page 636 pages. Available in PDF, EPUB and Kindle. Book excerpt: Behavioral finance is the study of how psychology affects financial decision making and financial markets. It is increasingly becoming the common way of understanding investor behavior and stock market activity. Incorporating the latest research and theory, Shefrin offers both a strong theory and efficient empirical tools that address derivatives, fixed income securities, mean-variance efficient portfolios, and the market portfolio. The book provides a series of examples to illustrate the theory. The second edition continues the tradition of the first edition by being the one and only book to focus completely on how behavioral finance principles affect asset pricing, now with its theory deepened and enriched by a plethora of research since the first edition

Download or read book The Post offering Price Performance of Closed end Funds written by Kathleen Weiss and published by . This book was released on 1989 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Investor Sentiment and Long run Underperformance of New Issues written by Brian Zingale and published by . This book was released on 2005 with total page 140 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Sentiment Versus Liquidity Pricing Effects in the Cross Section of UK Stock Returns written by Niall O'Sullivan and published by . This book was released on 2019 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the asset pricing role of 'sentiment risk' in stock returns in the case of the UK stock market. We define sentiment risk as the sensitivity of stock returns to investor sentiment in financial markets. We incorporate a broad range of financial market variables in measuring financial conditions and use this as a proxy for market-wide investor sentiment. The paper distinguishes between rational and irrational (noisy) investor sentiment. Initial findings indicate a strong role for rational sentiment risk in the returns of FTSE All Share stocks. However, our paper makes a key contribution by identifying that this evidence largely disappears after controlling for the liquidity risk features of stocks. No evidence of sentiment risk pricing is found among the subgroups of FTSE 250 and FTSE 100 stocks. More generally, our findings point to a strong relation between sentiment risk and liquidity risk in returns and the need for careful disentangling of sentiment versus liquidity effects.

Download or read book Investor Sentiment and Stock Price written by Saumya Dash and published by . This book was released on 2013 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: The impact of investor sentiment on stock market price has been a subject of long standing interest to both economists and practitioners. Following the theoretical argument of behavioral asset pricing, recent literature confirms the possible linkage between the aggregate investor sentiment and stock returns. In this paper we examine the causal relationship between investor sentiment index constructed from various market related implicit proxies, and aggregate stock market indices such as BSE sensex and NSE Nifty indices. The Johansen co-integration test is applied to measure the long-term relationship between the sentiment index and market indices and Error Correction Method has been used to check the short-term relationship between the two variables. Granger causality test is used to check the causal relationship between them. Our results suggest that, given the evidence of comovements of sentiment and market index there is significant long-run and short-run relationship between the two indices. Consistent with the existing literature which suggest that the sentiment effect is a short-run phenomena, our findings gives an indication that long term investment strategy can effectively mitigate the sentiment risk. The results for causality test suggest that there exist a unidirectional causal relationship between the sentiment index and market indices.

Download or read book Essays in Investor Sentiment written by Major Coleman and published by . This book was released on 2013 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: Chapter 1. If investors choose consumption and investment levels jointly to maximize expected utility or value, then investor sentiment about stock returns should be reflected in consumption choices. I find a positive contemporaneous relationship between aggregate consumption of nondurables and investor stock sentiment. Investors' false perceptions of changes in stock market wealth appear to move consumption in the same direction initially. But as expected stock returns do not materialize, sentiment-based consumption is reversed. On average, this reversal occurs two to four years later, which coincides with the time it takes for sentiment to correct from prior levels. Sentiment does not positively predict returns as a positive proxy of rational expectations of risk would. Nor does sentiment negatively predict the covariance between consumption growth and returns as an inverse proxy for rational expectations of risk would. The results suggest that bias in investor expectations is an important factor in consumption-based asset pricing models. Chapter 2. I hypothesize that directly observable past returns drive housing investment more so than fundamentals because the difference between price and fundamental value---sentiment---is not directly observable. Housing sentiment only becomes recognizable when it is extreme, so the magnitude of sentiment must be large enough relative to recent returns in order for prices to correct. I construct indices of housing sentiment and use the measures to calibrate a specification of home price growth driven by momentum investing. I find that home price growth is persistent even when prices are moving away from fundamental value, and reversals in home price growth are only likely when the housing sentiment measures are extreme.

Download or read book Investor Sentiment and the Closed End Fund Puzzle written by John A. Doukas and published by . This book was released on 2003 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we examine the proposition that small investor sentiment, measured by the change in the discount/premium on closed-end funds, is an important factor in stock returns. We conduct an out-of-sample test of the investor sentiment hypothesis in a market environment that is more likely to be prone to investor sentiment than the U.S. We fail to provide supporting evidence of the claim of Lee, Shleifer, and Thaler (1991) that investor sentiment affects the risk of common stocks. Consistent with Elton, Gruber, and Busse (1998), who show that investor sentiment does not enter the return generating process, our tests do not detect investor sentiment in a capital market that is more susceptible to small investor sentiment. Our results provide additional support against the claim that investor sentiment represents an independent and systematic asset pricing risk.