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- Title
Sentiment and the cross‐section of expected stock returns.
- Authors
Jacoby, Gady; Liao, Chi; Lin, Nanying; Lu, Lei
- Abstract
The asset pricing Literature suggests market sentiment is a state variable. This study shows that market sentiment is positively priced at the cross‐section of stock returns, conditional on aggregate investors' sentiment. We estimate individual stock sentiment beta and find that, following low‐sentiment periods, stocks in the highest sentiment beta quintile generate a 0.74% higher monthly return than stocks in the lowest sentiment beta quintile. However, this return spread is insignificant following medium‐ or high‐sentiment periods. This finding is consistent with the argument that overpricing following high‐sentiment periods is more prevalent than underpricing following low‐sentiment periods due to short‐sale constraints.
- Subjects
EXPECTED returns; RATE of return on stocks; MARKET sentiment; MARKETING literature; PRICES
- Publication
Financial Review, 2024, Vol 59, Issue 2, p459
- ISSN
0732-8516
- Publication type
Article
- DOI
10.1111/fire.12380