When Does Investor Sentiment Predict Stock Returns ?

  title={When Does Investor Sentiment Predict Stock Returns ?},
  author={San-Lin Chung and C Hung and Chung-Ying Yeh},
We examine the predictive effect of sentiment on the cross-section of stock returns across different economic states. The regime-switching feature on stock returns may cause a problem in identifying the source of the return predictability. In addition, the investors’ uncertainty about the state of the economy predicts the presence of asymmetries in the predictive ability of sentiment over different economic states. We implement a multivariate Markov-switching model to characterize the economic… CONTINUE READING


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