Abstract
We explore the role of extrapolative beliefs in return predictability in the Chinese stock market. Extrapolation-based theories suggest that the return predictability arises from the eventual correction of mispricing caused by extrapolators, particularly during periods of high extrapolative beliefs. Our findings support this notion, indicating that greater extrapolative beliefs strengthen the return predictability of valuation ratios. Mechanism analyses reveal that extrapolative beliefs influence the mean-reversion and investor sentiment.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
