Investor Sentiment, Disagreement, and the Breadth-Return Relationship

• 成果类型: Article
• 署名作者: Cen, Ling; Lu, Hai; Yang, Liyan
• 署名单位: University of Toronto
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.1120.1633
• 发表日期: 2013
• 页码: 1076-1091
• 关键词: Investor sentiment; DISAGREEMENT; breadth of ownership; cross-sectional stock returns

摘要

We study the cross-sectional breadth-return relation by assuming that investors subject to market sentiment hold a biased belief in the aggregate. With a dynamic multiasset model, we predict that the breadth-return relationship can be either positive or negative depending on the relative strength of two offsetting forces-disagreement and sentiment. We find evidence consistent with our predictions. The breadth-return relationship is positive when the sentiment effect is small. However, the relationship becomes negative when (i) the time-series variation of market-wide sentiment is high and (ii) the cross-sectional dispersion of firm-specific exposure to market-wide sentiment variation is large. Our unified framework reconciles a few seemingly inconsistent empirical studies in this literature and explains puzzling cross-sectional return patterns observed during the Internet bubble and the subprime crisis periods.