Market response to investor sentiment

Jördis Hengelbrock, Erik Theissen, Christian Westheide

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

This paper reconsiders the effect of investor sentiment on stock prices. Our main contribution is that, in addition to the intermediate term return predictability, we also analyze the immediate price reaction to the publication of survey-based investor sentiment indicators. We find that the sign of the immediate market response is the same as that of the predictability at intermediate time horizons. This is consistent with underreaction to cash flow news or with investor sentiment being related to mispricing. It is inconsistent with the alternative explanations of a rational response to cash flow news or sentiment indicators providing information about future expected returns.
Original languageEnglish
Pages (from-to)901-917
Number of pages17
JournalJournal of Business Finance and Accounting
Volume40
Issue number7-8
DOIs
Publication statusPublished - 21 Oct 2013

Keywords / Materials (for Non-textual outputs)

  • investor sentiment
  • event study
  • return predictability

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