Aggregate investor sentiment and stock return synchronicity

Author First name, Last name, Institution

Timothy K. Chue, Hong Kong Polytechnic University
Ferdinand A. Gul, Deakin University
G. Mujtaba Mian, Zayed University

ORCID Identifiers

0000-0002-1989-7087

Document Type

Article

Source of Publication

Journal of Banking and Finance

Publication Date

11-1-2019

Abstract

© 2019 Elsevier B.V. We show that the returns of individual stocks become more synchronous with the aggregate market during periods of high investor sentiment. We also document that the effect of sentiment on stock return synchronicity is especially pronounced for small, young, volatile, non-dividend-paying and low-priced stocks. This ‘difference in difference’ suggests that stocks with these characteristics are affected more by sentiment—consistent with previous studies. Our results support the hypothesis that greater constraints on arbitrage and the prevalence of sentiment-driven demand during periods of high sentiment lead to increased comovement among stocks.

DOI Link

10.1016/j.jbankfin.2019.105628

ISSN

0378-4266

Publisher

Elsevier B.V.

Volume

108

First Page

105628

Disciplines

Business

Keywords

Aggregate investor sentiment, Cross-sectional difference, Stock return synchronicity, Time-series variation

Scopus ID

85072288590

Recommended Citation

Chue, Timothy K.; Gul, Ferdinand A.; and Mian, G. Mujtaba, "Aggregate investor sentiment and stock return synchronicity" (2019). All Works. 380.
https://zuscholars.zu.ac.ae/works/380

Indexed in Scopus

yes

Open Access

no