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Are survey forecasts of individual and institutional investor sentiments rational?

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  • Verma, Rahul
  • Verma, Priti

Abstract

We examine the effects of rational risk factors on investor sentiments. We find that institutional investor sentiments are more rational than individual investor sentiments. There are significant positive effects of, market return and dividend yield and negative effect of inflation on both types of sentiments. These risk factors have stronger effects on institutional than individual investor sentiments. Also, there are significant effects of term spread and HML on the institutional investor sentiments. The evidence suggests that linkages between sentiments and stock return stems from a combination of rational outlook and noise i.e. expectations that are not fully justified by information.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Financial Analysis.

Volume (Year): 17 (2008)
Issue (Month): 5 (December)
Pages: 1139-1155

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Handle: RePEc:eee:finana:v:17:y:2008:i:5:p:1139-1155

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Web page: http://www.elsevier.com/locate/inca/620166

Related research

Keywords: Stock returns Investor sentiment VAR model;

References

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Citations

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Cited by:
  1. Guzman, Giselle C., 2008. "Using sentiment to predict GDP growth and stock returns," MPRA Paper 36505, University Library of Munich, Germany.
  2. Guzman, Giselle C., 2008. "Using sentiment surveys to predict GDP growth and stock returns," MPRA Paper 36653, University Library of Munich, Germany.
  3. Chiao-Yi Chang, 2013. "Daily momentum profits with firm characteristics and investors’ optimism in the Taiwan market," Journal of Economics and Finance, Springer, vol. 37(2), pages 253-273, April.
  4. Belghitar, Yacine & Clark, Ephraim & Kassimatis, Konstantino, 2011. "The prudential effect of strategic institutional ownership on stock performance," International Review of Financial Analysis, Elsevier, vol. 20(4), pages 191-199, August.

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