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Investor sentiment, information and asset pricing model

  • Yang, Chunpeng
  • Li, Jinfang
Registered author(s):

    We present an asset pricing model with investor sentiment and information, which shows that the investor sentiment has a systematic and significant impact on the asset price. The equilibrium price's rational term drives the asset price to the rational, and the sentiment term leads to the asset price deviating from it. In our model, the proportion of sentiment investors and the information quality could amplify the sentiment shock on the asset price. Finally, the information is fully incorporated into prices when sentiment investors learn from prices. The model could offer a partial explanation of some financial anomalies: price bubbles, high volatility, asset prices' momentum effect and reversal effect.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0264999313002800
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    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 35 (2013)
    Issue (Month): C ()
    Pages: 436-442

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    Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:436-442
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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