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A model of investor sentiment

Listed author(s):
  • Barberis, Nicholas
  • Shleifer, Andrei
  • Vishny, Robert

Recent empirical research in finance has uncovered two families of pervasive regularities: underreaction of stock prices to news such as earnings announcements; and overreaction of stock prices to a series of good or bad news. In this paper, we present a parsimonious model of investor sentiment that is, of how investors form beliefs that is consistent with the empirical findings. The model is based on psychological evidence and produces both underreaction and overreaction for a wide range of parameter values.

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Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 49 (1998)
Issue (Month): 3 (September)
Pages: 307-343

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Handle: RePEc:eee:jfinec:v:49:y:1998:i:3:p:307-343
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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