Investor sentiment and paradigm shifts in equity premium forecasting

• Main Authors: CHU, Liya, LI, Kai, HE, Tony Xue-zhong, Jun TU
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2022
• Subjects: Return predictability; Investors sentiment; Economic predictors; Non-fundamental predictors; Finance; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/7019; https://ink.library.smu.edu.sg/context/lkcsb_research/article/8018/viewcontent/InvestorSentiment_ParadigmShifts_av.pdf
• Institution: Singapore Management University

This study investigates the impact of investor sentiment on excess equity return forecasting. A high (low) investor sentiment may weaken the connection between fundamental economic (behavioral-based non-fundamental) predictors and market returns. We find that although fundamental variables can be st...