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Asymmetric effect of FEARS Sentiment on Stock Returns: Short-sale constraints, limits to arbitrage, and behavioural biases

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  • Garima Goel
  • Saumya Ranjan Dash
  • Robert Brooks
  • Sowmya Subramaniam

Abstract

This paper examines the implications of short-sale constraints, limits to arbitrage, and behavioral biases on the FEARS sentiment and stock returns asymmetric relationship. Our results indicate a strong negative relationship between FEARS sentiment and stock return. Our findings show that short-sell and arbitrage constraint attenuates the potential impact of sentiment on return behavior. We find that the FEARS sentiment influences behavioral biases and the trading activity of market participants.

Suggested Citation

  • Garima Goel & Saumya Ranjan Dash & Robert Brooks & Sowmya Subramaniam, 2022. "Asymmetric effect of FEARS Sentiment on Stock Returns: Short-sale constraints, limits to arbitrage, and behavioural biases," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(11), pages 3119-3135, September.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:11:p:3119-3135
    DOI: 10.1080/1540496X.2022.2028618
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    Cited by:

    1. Chiang, Shu Ling & Tsai, Ming Shann, 2023. "Analyses for the effects of investor sentiment on the price adjustment behaviors for stock market and REIT market," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 425-439.

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