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Investor mood and the determinants of stock prices: an experimental analysis
Author(s) -
Harding Noel,
He Wen
Publication year - 2016
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12098
Subject(s) - mood , earnings , stock (firearms) , affect (linguistics) , stock market , economics , risk aversion (psychology) , cash flow , monetary economics , behavioral economics , financial economics , psychology , business , clinical psychology , finance , expected utility hypothesis , geography , communication , context (archaeology) , archaeology
Abstract We examine, in a controlled experimental setting, whether changes in investor mood cause changes in the determinants of stock prices. Our results show that a deterioration in mood, reflected in the negative dimensions of mood state, increases the level of risk aversion in male, but not female, investors. We find no evidence to suggest that a change in mood impacts on investors' forecasts of future earnings or future cash flows. By establishing the causal impact of a change in mood on risk aversion, our study provides support for archival research that relates various market anomalies to investor mood.