Bottom-up sentiment and return predictability of the market portfolio

The Threshold Effect of Investors Sentiment On Stock Market Return

The behavioral financial perspective shows some changes in the price of securities have no fundamental reason and depend on the irrational behaviors of investors as measured by the investor sentiment. Investor sentiment plays an important role in the volatility of securities prices and returns. At first, by finding the thresholds and testing these points statistically, we showed that the invest...

Financial Economics, Return Predictability and Market Efficiency

Market Closure , Liquidity Premia , and Return Predictability ∗

In his seminal work, Constantinides (1986) finds that transaction cost has only a second order effect on liquidity premia. In this paper, we show that incorporating the well-established time-varying return dynamics across trading and nontrading periods can produce a first order effect that is much greater than that found by the existing literature and comparable to empirical evidence. Surprisin...

Commodity Market Interest and Asset Return Predictability ∗

We establish several new findings on the relation between open interest in commodity markets and asset returns. High commodity market activity, as measured by high open-interest growth, predicts high commodity returns and low bond returns. Openinterest growth is a more powerful and robust predictor of commodity returns than other known predictors such as the short rate, the yield spread, the ba...

Investor Sentiment, Disagreement and Return Predictability of Ownership Breadth

We extend theories and empirics in Chen, Hong and Stein (2002) by allowing investors subject to market sentiment to hold a biased belief in aggregate. With a dynamic multiple-asset model, we show that the ownership breadth-return relationship can be either positive or negative depending on the relative strength of two offsetting forces: (1) variation in disagreement and (2) variation in sentime...