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Aggregate investor sentiment and stock return synchronicity
journal contribution
posted on 2019-11-01, 00:00 authored by T K Chue, Ferdinand GulFerdinand Gul, G M Mian© 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.
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Journal
Journal of banking and financeVolume
108Article number
105628Publisher
ElsevierLocation
Amsterdam, The NetherlandsPublisher DOI
ISSN
0378-4266Language
engPublication classification
C1 Refereed article in a scholarly journal; C Journal articleCopyright notice
2019, Elsevier B.V.Usage metrics
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