Are survey forecasts of individual and institutional investor sentiments rational? |
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Authors: | Rahul Verma Priti Verma |
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Institution: | a College of Business, University of Houston-Downtown, One Main Street, Houston, TX 77002, United States b College of Business, Texas A&M University, Kingsville, Kingsville, TX 78363, United States |
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Abstract: | We examine the effects of rational risk factors on investor sentiments. We find that institutional investor sentiments are more rational than individual investor sentiments. There are significant positive effects of, market return and dividend yield and negative effect of inflation on both types of sentiments. These risk factors have stronger effects on institutional than individual investor sentiments. Also, there are significant effects of term spread and HML on the institutional investor sentiments. The evidence suggests that linkages between sentiments and stock return stems from a combination of rational outlook and noise i.e. expectations that are not fully justified by information. |
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Keywords: | G12 G14 C22 |
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