6533b82afe1ef96bd128c498
RESEARCH PRODUCT
Is Sentiment Risk Priced By Stock Market?
Mohamed ZouaouiMohamad WatfaFrancisca Beersubject
investor sentiment;stock returns;noise trader riskProfit (accounting)Financial economicsRisk premiumBehavioral economicsBehavioral FinanceProfit (economics)0502 economics and businessEconomicsBusiness and International Management050207 economics[ SHS.GESTION ] Humanities and Social Sciences/Business administrationStock (geology)050208 finance05 social sciencesFinancial marketMomentum factorStock Returnsjel:G12jel:G11jel:G14Noise Trader RiskPortfolio[SHS.GESTION]Humanities and Social Sciences/Business administrationStock marketInvestor Sentimentdescription
International audience; This study tests if the financial markets price the investors sentiment risk. We construct portfolios based upon the stock returns exposure to sentiment. Our results show that the portfolio returns are positively correlated with the exposure of stocks to sentiment. The strategy that consists of buying stocks with the highest exposure to sentiment and selling stocks with the lowest exposure to sentiment generates a significant raw profit. Exploring the sources of profit, we find that neither the traditional risk factors nor the momentum factor can account for the profit. However, we find that the addition of the sentiment risk premium contributes to explain the profit.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2012-06-01 |