Equity Risk Premia, Corporate Profit Forecasts, and Investor Sentiment around the Stock Crash of October 1987
AbstractThis paper confirms that changes in consensus corporate profit forecasts and interest rates were completely unable to explain the rise and subsequent collapse of stock prices during 1987. The equity risk premium would have had to fall and then rise by about 4 percentage points to explain the behavior of stock prices around the crash on the basis of standard valuation models. Such shifts did not occur during the 1990-91 stock market cycle. There was, however, an unusually wide divergence of future profit forecasts before the crash, a phenomenon that may have left the market vulnerable to shifting investing sentiment. Copyright 1992 by University of Chicago Press.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 65 (1992)
Issue (Month): 4 (October)
Contact details of provider:
Web page: http://www.journals.uchicago.edu/JB/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Mohamed Zouaoui & Geneviève Nouyrigat & Francisca Beer, 2011. "How does investor sentiment affect stock market crises?Evidence from panel data," Working Papers FARGO 1110304, Université de Bourgogne - Leg (laboratoire d'économie et de gestion)/Fargo (Research center in Finance,organizational ARchitecture and GOvernance).
- M. Zouaoui & G. Nouyrigat & F. Beer, 2010. "How does investor sentiment affect stock market crises? Evidence from panel data," Post-Print halshs-00534754, HAL.
- Lei, Qin & Wu, Guojun, 2005. "Time-varying informed and uninformed trading activities," Journal of Financial Markets, Elsevier, vol. 8(2), pages 153-181, May.
- Lee, Wayne Y. & Jiang, Christine X. & Indro, Daniel C., 2002. "Stock market volatility, excess returns, and the role of investor sentiment," Journal of Banking & Finance, Elsevier, vol. 26(12), pages 2277-2299.
- Kling, Gerhard & Gao, Lei, 2008. "Chinese institutional investors' sentiment," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(4), pages 374-387, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division).
If references are entirely missing, you can add them using this form.