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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26545
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| Title: | Individual Investor Sentiment and Stock Returns |
| Authors: | Kaniel, Ron
Saar, Gideon
Titman, Sheridan |
| Issue Date: | Sep-2004 |
| Series/Report no.: | FIN-04-023 |
| Abstract: | This paper investigates a unique dataset that enables us to determine
the aggregate buy and sell volume of individual investors for a large
cross-section of NYSE stocks. We find that individuals trade as if they
are contrarians, and that the stocks that individuals buy exhibit
positive excess returns in the following month. These patterns are
consistent with the idea that risk-averse individuals provide liquidity
to meet institutional demand for immediacy. We further examine the
relation between individual investor sentiment and short-horizon
(weekly) return reversals that have been documented in the literature.
Our results reveal that individual investor sentiment predicts future
returns, and that the information content of investor sentiment is
distinct from that of past returns or past volume. Furthermore, the
trading of individuals predicts weekly returns in the post-2000 era for
stocks of all sizes, while past return seems to have lost its predictive
power for all but small stocks over the same time period. Lastly, we
note that there is very little cross-sectional correlation of our
individual sentiment measure across the stocks in our sample. |
| URI: | http://hdl.handle.net/2451/26545 |
| Appears in Collections: | Finance Working Papers
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