How commonality persists? (Through investors' sentiment and attention)

Studies on commonality generally attribute the variation in asset returns to the variation in order flows. In this research study, we show that order flows do not predict asset returns, rather their relationship have been static over time. Thus we model both returns and the order flows as endogenous...

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Main Authors: TEE, Chyng Wen, VELU, Raja, ZHOU, Zhaoque
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2023
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/7361
https://ink.library.smu.edu.sg/context/lkcsb_research/article/8360/viewcontent/How_Commonality_Persists_through_Investors_Sentiment_and_Attention.pdf
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spelling sg-smu-ink.lkcsb_research-83602024-01-04T05:51:50Z How commonality persists? (Through investors' sentiment and attention) TEE, Chyng Wen VELU, Raja ZHOU, Zhaoque Studies on commonality generally attribute the variation in asset returns to the variation in order flows. In this research study, we show that order flows do not predict asset returns, rather their relationship have been static over time. Thus we model both returns and the order flows as endogenous variables, and use investors' sentiment and attention as exogenous factors via a reduced-rank regression. We provide empirical evidence to demonstrate that cross-sectional commonality in attention (sentiment) is linearly (nonlinearly) associated with both returns and order flows at the intraday level, while the sentiment and attention measures themselvesexhibit a nonlinear mutual relationship, thus revealing the multi-dimensional complex aspect of the commonality relationship. The persistence of this relationship over a decade is documented using a largesample of assets. The concept of commonality is also related to portfolio optimization. 2023-12-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/7361 https://ink.library.smu.edu.sg/context/lkcsb_research/article/8360/viewcontent/How_Commonality_Persists_through_Investors_Sentiment_and_Attention.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University commonality return and order flow measures co-movement market sentiment investor attention principal component analyses canonical correlation analyses reduced rank regression quantitative trading strategies Corporate Finance Finance Finance and Financial Management
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic commonality
return and order flow measures
co-movement
market sentiment
investor attention
principal component analyses
canonical correlation analyses
reduced rank regression
quantitative trading strategies
Corporate Finance
Finance
Finance and Financial Management
spellingShingle commonality
return and order flow measures
co-movement
market sentiment
investor attention
principal component analyses
canonical correlation analyses
reduced rank regression
quantitative trading strategies
Corporate Finance
Finance
Finance and Financial Management
TEE, Chyng Wen
VELU, Raja
ZHOU, Zhaoque
How commonality persists? (Through investors' sentiment and attention)
description Studies on commonality generally attribute the variation in asset returns to the variation in order flows. In this research study, we show that order flows do not predict asset returns, rather their relationship have been static over time. Thus we model both returns and the order flows as endogenous variables, and use investors' sentiment and attention as exogenous factors via a reduced-rank regression. We provide empirical evidence to demonstrate that cross-sectional commonality in attention (sentiment) is linearly (nonlinearly) associated with both returns and order flows at the intraday level, while the sentiment and attention measures themselvesexhibit a nonlinear mutual relationship, thus revealing the multi-dimensional complex aspect of the commonality relationship. The persistence of this relationship over a decade is documented using a largesample of assets. The concept of commonality is also related to portfolio optimization.
format text
author TEE, Chyng Wen
VELU, Raja
ZHOU, Zhaoque
author_facet TEE, Chyng Wen
VELU, Raja
ZHOU, Zhaoque
author_sort TEE, Chyng Wen
title How commonality persists? (Through investors' sentiment and attention)
title_short How commonality persists? (Through investors' sentiment and attention)
title_full How commonality persists? (Through investors' sentiment and attention)
title_fullStr How commonality persists? (Through investors' sentiment and attention)
title_full_unstemmed How commonality persists? (Through investors' sentiment and attention)
title_sort how commonality persists? (through investors' sentiment and attention)
publisher Institutional Knowledge at Singapore Management University
publishDate 2023
url https://ink.library.smu.edu.sg/lkcsb_research/7361
https://ink.library.smu.edu.sg/context/lkcsb_research/article/8360/viewcontent/How_Commonality_Persists_through_Investors_Sentiment_and_Attention.pdf
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