PDF(394 KB)
A New Investor Sentiment Indicator Based on Return Decomposition
Yuan LIU, Yan SHANG, Jianming SHI, Shouyang WANG
Journal of Systems Science and Information ›› 2016, Vol. 4 ›› Issue (2) : 121-130.
PDF(394 KB)
PDF(394 KB)
A New Investor Sentiment Indicator Based on Return Decomposition
This paper extends the DSSW model to accommodate rational arbitrageurs, optimistic investors and pessimistic investors. We model the price impact by using daily data and create a new methodology to calculate the optimistic and the pessimistic. The new sentiment indicator has high correlation with the other traditional ones, and as a proxy variable of individual share or financial market on daily, it could distinguish the optimistic and the pessimistic. In the empirical research, we develop a time-series model and a cross-section model respectively to explore the explanatory power of highly frequent investor sentiment to idiosyncratic volatility and capital asset mispricing. The results show that the new sentiment indicator can explain 21.31% of idiosyncratic volatility to individual share on average, and it has a great explanation of 36% to capital asset mispricing.
DSSW model / investor sentiment / idiosyncratic volatility / asset mispricing {{custom_keyword}} /
[1] Black F. Noise. Journal of Finance, 1986, 41(3):529-543.
[2] De Long J B, Shleifer A, Summers L H, et al. Noise trader risk in financial-markets. Journal of Political Economy, 1990, 98(4):703-738.
[3] Mehra R, Prescott E C. The equity premium-A puzzle. Journal of Monetary Economics, 1985, 15(2):145-161.
[4] Campbell J Y, Shiller R J. Cointegration and tests of present value models. Journal of Political Economy, 1987, 95(5):1062-1088.
[5] Shiller R J. Theories of aggregate stock-price movements. Journal of Portfolio Management, 1984, 10(2):28-37.
[6] Shiller R J. Market volatility and investor behavior. American Economic Review, 1990, 80(2):58-62.
[7] Shefrin H, Statman M. Behavioral capital-asset pricing theory. Journal of Financial and Quantitative Analysis, 1994, 29(3):323-349.
[8] Shefrin H, Statman M. A behavioral framework for expectations about stock returns. Journal of Finance, 1994, 49(3):1096-1097.
[9] Shefrin H, Statman M. Behavioral portfolio theory. Journal of Financial and Quantitative Analysis, 2000, 35(2):127-151.
[10] Fang L, Peress J. Media coverage and the cross-section of stock returns. Journal of Finance, 2009, 64(5):2023-2052.
[11] Tetlock P C. Giving content to investor sentiment:The role of media in the stock market. Journal of Finance, 2007, 62(3):1139-1168.
[12] Ho C, Hung C H. Investor sentiment as conditioning information in asset pricing. Journal of Banking & Finance, 2009, 33(5):892-903.
[13] Liu S M. Investor sentiment and stock market liquidity. Journal of Behavioral Finance, 2015, 16(1):51-67.
[14] Lee C M C, Shleifer A, Thaler R H. Investor sentiment and the closed-end fund puzzle. Journal of Finance, 1991, 46(1):75-109.
[15] Baker M, Stein J C. Market liquidity as a sentiment indicator. Journal of Financial Markets, 2004, 7(3):271-299.
[16] Cornelli F, Goldreich D, Ljungqvist A. Investor sentiment and pre-IPO markets. Journal of Finance, 2006, 61(3):1187-1216.
[17] Amihud Y. Illiquidity and stock returns:Cross-section and time-series effects. Journal of Financial Markets, 2002, 5(1):31-56.
[18] Brown G W, Cliff M T. Investor sentiment and asset valuation. Journal of Business, 2005, 78(2):405-440.
[19] Baker M, Wurgler J. Investor sentiment and the cross-section of stock returns. Journal of Finance, 2006, 61(4):1645-1680.
PDF(394 KB)
/
| 〈 |
|
〉 |
