Article
Aggregate investor sentiment and stock return synchronicity
Journal of Banking and Finance
ORCID Identifiers
Document Type
Article
Publication Date
11-1-2019
Abstract
© 2019 Elsevier B.V. We show that the returns of individual stocks become more synchronous with the aggregate market during periods of high investor sentiment. We also document that the effect of sentiment on stock return synchronicity is especially pronounced for small, young, volatile, non-dividend-paying and low-priced stocks. This ‘difference in difference’ suggests that stocks with these characteristics are affected more by sentiment—consistent with previous studies. Our results support the hypothesis that greater constraints on arbitrage and the prevalence of sentiment-driven demand during periods of high sentiment lead to increased comovement among stocks.
DOI Link
10.1016/j.jbankfin.2019.105628
Publisher
Elsevier B.V.
Disciplines
Keywords
- Aggregate investor sentiment,
- Cross-sectional difference,
- Stock return synchronicity,
- Time-series variation
Scopus ID
85072288590
Indexed in Scopus
Yes
Open Access
No
https://doi.org/10.1016/j.jbankfin.2019.105628
Citation Information
Timothy K. Chue, Ferdinand A. Gul and G. Mujtaba Mian. "Aggregate investor sentiment and stock return synchronicity" Journal of Banking and Finance Vol. 108 (2019) p. 105628 ISSN: <a href="https://v2.sherpa.ac.uk/id/publication/issn/0378-4266" target="_blank">0378-4266</a> Available at: http://works.bepress.com/mujtaba-mian/1/