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Investor sentiment and industry returns

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  • Alexander Molchanov
  • Jeffrey Stangl

Abstract

This paper investigates the interaction between investor sentiment and industry performance. Investor sentiment has a widespread and systematic effect on performance, and predicts short‐term mispricing at industry level. Predictable long‐term reversals are weaker. We find limited evidence of cross‐sectional industry differences. Moreover, there is no relationship between investor sentiment and industry characteristics that proxy valuation uncertainty. Results generally show that investor sentiment has a market‐wide effect, questioning merit of industry timing strategy based on sentiment.

Suggested Citation

  • Alexander Molchanov & Jeffrey Stangl, 2018. "Investor sentiment and industry returns," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 23(4), pages 546-570, October.
    • Handle: RePEc:wly:ijfiec:v:23:y:2018:i:4:p:546-570
    DOI: 10.1002/ijfe.1637
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    Cited by:

    1. Yang, Haijun & Ge, Hengshun & Gao, Xinpeng, 2022. "An information diffusion model for momentum effect based on investor wealth," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    2. Dahmene, Meriam & Boughrara, Adel & Slim, Skander, 2021. "Nonlinearity in stock returns: Do risk aversion, investor sentiment and, monetary policy shocks matter?," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 676-699.
    3. Muhammad Ateeq ur REHMAN & Syed Ghulam Meran SHAH & Lucian-Ionel CIOCA & Alin ARTENE, 2021. "Accentuating the Impacts of Political News on the Stock Price, Working Capital and Performance: An Empirical Review of Emerging Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 55-73, June.
    4. Blajer-Gołębiewska, Anna & Honecker, Lukas & Nowak, Sabina, 2024. "Investor sentiment response to COVID-19 outbreak-related news: A sectoral analysis of US firms," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).

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