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The term structure effects of individual stock investor sentiment on excess returns
Author(s) -
Li Jinfang
Publication year - 2021
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1872
Subject(s) - stock (firearms) , economics , excess return , econometrics , irrational number , stock market , term (time) , financial economics , mathematics , mechanical engineering , paleontology , context (archaeology) , physics , quantum mechanics , engineering , biology , geometry , horse
In this paper, we construct the individual stock sentiment indexes at daily, weekly and monthly frequencies. We empirically demonstrate the different effects of individual stock sentiment of three frequencies on the excess returns. The results show that the effect of individual stock sentiment on excess returns is a monotonous decreasing function of time term in China's stock market, which presents obvious term structure effect. Moreover, we find that sentiment factor can better explain the variation of excess returns than size factor and book‐to‐market factor do at the same frequency, and thus we should pay more attention to the individual effect of investor sentiment in the short‐term decision‐making. Our results shed new light on the short‐sighted behaviour of irrational investors and the micro‐mechanism of sentiment effect.