Abstract
ABSTRACTIn the presence of sentiment fluctuations, arbitrageurs may engage in different strategies leading to dispersed sentiment exposures. We find that hedge funds in the top decile ranked by sentiment beta outperform those in the bottom decile by 0.59% per month on a risk‐adjusted basis, with the spread being larger among skilled funds. We also find that about 10% of hedge funds have sentiment timing skill that positively correlates with fund sentiment beta and contributes to fund performance. Our findings show that skilled hedge funds can earn high returns by predicting and exploiting sentiment changes rather than betting against mispricing.
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.
