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The impact of sentiment on price discovery
Author(s) -
Coulton Jeffrey J.,
Dinh Tami,
Jackson Andrew B.
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.12128
Subject(s) - sentiment analysis , price discovery , economics , process (computing) , market sentiment , econometrics , financial economics , computer science , artificial intelligence , operating system , futures contract
We study how investor sentiment affects the speed with which prices reflect information. Price discovery is more timely for firms with greater sensitivity to sentiment, as measured by a sentiment beta. Our research improves our understanding of the price formation process when sentiment is not assumed to be constant. Our research design is novel as it considers a sentiment beta as well as economy‐wide sentiment. This provides more comprehensive evidence on the impact of differing types of sentiment on the price formation process.

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