Darren Duxbury
Investor Sentiment and the Risk‐Return Relation: A Two‐in‐One Approach
Duxbury, Darren; Wang, Wenzhao
Abstract
Traditional finance theory posits a positive risk–return relation, but empirical evidence is inconclusive. Retail investor sentiment has long been viewed as a distorting factor, while more recently institutional investor sentiment is thought to play a role. We examine the separate and joint impacts of retail and institutional investor sentiments on the risk-return relation. We find, at both market and firm levels, the risk-return relation is more likely to be distorted by the two investor-type sentiments jointly, rather than separately. We further find a cross-sectional pattern, with the risk-return relation being more sensitive to investor sentiment for stocks with specific characteristics.
Citation
Duxbury, D., & Wang, W. (2024). Investor Sentiment and the Risk‐Return Relation: A Two‐in‐One Approach. European Financial Management, 30(1), Article 496-543. https://doi.org/10.1111/eufm.12427
Journal Article Type | Article |
---|---|
Acceptance Date | Apr 21, 2023 |
Online Publication Date | May 13, 2023 |
Publication Date | 2024-01 |
Deposit Date | May 15, 2023 |
Publicly Available Date | May 15, 2023 |
Print ISSN | 1354-7798 |
Publisher | Wiley |
Peer Reviewed | Peer Reviewed |
Volume | 30 |
Issue | 1 |
Article Number | 496-543 |
DOI | https://doi.org/10.1111/eufm.12427 |
Keywords | beta-return relation, institutional investor sentiment, mean–variance relation, retail investor sentiment, risk-return relation |
Public URL | http://researchrepository.napier.ac.uk/Output/3089601 |
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Investor Sentiment And The Risk‐Return Relation: A Two‐in‐One Approach
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