Global, Local, and Contagious Investor Sentiment

  title={Global, Local, and Contagious Investor Sentiment},
  author={M. Baker and Jeffrey Wurgler and Yu Yuan},
  journal={Capital Markets: Asset Pricing & Valuation},
  • M. Baker, Jeffrey Wurgler, Yu Yuan
  • Published 2009
  • Economics
  • Capital Markets: Asset Pricing & Valuation
  • We construct investor sentiment indices for six major stock markets and decompose them into one global and six local indices. In a validation test, we find that relative sentiment is correlated with the relative prices of dual-listed companies. Global sentiment is a contrarian predictor of country-level returns. Both global and local sentiment are contrarian predictors of the time-series of cross-sectional returns within markets: When sentiment is high, future returns are low on relatively… CONTINUE READING
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