Persistence of investor sentiment in the past 50 years: A behavioural perspective

Xiao Han, Nikolaos Sakkas, Jo Danbolt, Arman Eshraghi

Research output: Working paper

39 Downloads (Pure)

Abstract

We investigate changes in US market sentiment using structural break analysis over a 50-year period. Investor sentiment behaved like a trending, non-stationary time series from 1965 to 2001, a period associated with numerous bubbles and crashes. In the post-2001 period, sentiment has been substantially more mean reverting, implying the diminished effect of noise investors and lower associated mispricing. We explore how these changes in sentiment persistence affect well-documented equity anomalies, and assess the predictive power of sentiment on short-run returns when regime changes are considered. Our findings suggest that the presence of sentiment-driven investors and their market impact is significantly time-variant.
Original languageEnglish
Publication statusPublished - 2018

Cite this

Persistence of investor sentiment in the past 50 years: A behavioural perspective. / Han, Xiao; Sakkas, Nikolaos ; Danbolt, Jo ; Eshraghi, Arman.

2018.

Research output: Working paper

@techreport{0f77485b366a442c89495c187a3fcdcc,
title = "Persistence of investor sentiment in the past 50 years: A behavioural perspective",
abstract = "We investigate changes in US market sentiment using structural break analysis over a 50-year period. Investor sentiment behaved like a trending, non-stationary time series from 1965 to 2001, a period associated with numerous bubbles and crashes. In the post-2001 period, sentiment has been substantially more mean reverting, implying the diminished effect of noise investors and lower associated mispricing. We explore how these changes in sentiment persistence affect well-documented equity anomalies, and assess the predictive power of sentiment on short-run returns when regime changes are considered. Our findings suggest that the presence of sentiment-driven investors and their market impact is significantly time-variant.",
author = "Xiao Han and Nikolaos Sakkas and Jo Danbolt and Arman Eshraghi",
year = "2018",
language = "English",
type = "WorkingPaper",

}

TY - UNPB

T1 - Persistence of investor sentiment in the past 50 years: A behavioural perspective

AU - Han, Xiao

AU - Sakkas, Nikolaos

AU - Danbolt, Jo

AU - Eshraghi, Arman

PY - 2018

Y1 - 2018

N2 - We investigate changes in US market sentiment using structural break analysis over a 50-year period. Investor sentiment behaved like a trending, non-stationary time series from 1965 to 2001, a period associated with numerous bubbles and crashes. In the post-2001 period, sentiment has been substantially more mean reverting, implying the diminished effect of noise investors and lower associated mispricing. We explore how these changes in sentiment persistence affect well-documented equity anomalies, and assess the predictive power of sentiment on short-run returns when regime changes are considered. Our findings suggest that the presence of sentiment-driven investors and their market impact is significantly time-variant.

AB - We investigate changes in US market sentiment using structural break analysis over a 50-year period. Investor sentiment behaved like a trending, non-stationary time series from 1965 to 2001, a period associated with numerous bubbles and crashes. In the post-2001 period, sentiment has been substantially more mean reverting, implying the diminished effect of noise investors and lower associated mispricing. We explore how these changes in sentiment persistence affect well-documented equity anomalies, and assess the predictive power of sentiment on short-run returns when regime changes are considered. Our findings suggest that the presence of sentiment-driven investors and their market impact is significantly time-variant.

M3 - Working paper

BT - Persistence of investor sentiment in the past 50 years: A behavioural perspective

ER -