Abstract
Most of the empirical studies on investor sentiment have shown that the excess return of stock is negatively related to sentiment. However, some financial experiments implied that there is positive expected return when investor sentiment is high. Moreover, all of the empirical researches which treated the time series values of sentiment as an aggregate are in average meanings by regression analysis. Maybe there are some particular characters by considering the sentiment in different situations. This paper investigates whether the high sentiment will cause negative excess return by theoretical model. We obtained a critical point indicated that the excess return is negatively related to a high sentiment bigger than the critical point, but positively related to it smaller than this point.
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