Year-end Sale % OFF 
Abstract
Particularly, it is difficult to accurately measure investor sentiment due to the inherent complexity and dynamic change. This paper tests the impact of investors’ behavior in the U.S. equity market. By using monthly data from February 2014 to December 2018, the impacts of investor sentiment are examined. Besides, Fama-French risk factors are investigated in a new multiple factor asset pricing model. Specifically, the investor sentiment is measured by six-variable composite index. Empirical results indicate that the investor sentiment is a composition of systemic risk. In this case, the Fama-French three factor model with investor sentiment factor can fully explains the return of stocks in the USA stock market. By comparing the trend of investor sentiment and market index, investor sentiment will affect asset pricing and market volatility, i.e., verifies the effectiveness of investor sentiment index in the U.S, stock market.
Highlights
The research of capital market, especially the capital asset pricing, has been one of the hot spots in modern financial field
The capital asset pricing model predicts the relationship between asset risk and expected return, which is regarded as the benchmark of modern financial economics [1]
In order to conduct the investor sentiment index, lots of timeseries are obtained by principal components analysis based on the monthly data from February 2014 to December 2018
Summary
The research of capital market, especially the capital asset pricing, has been one of the hot spots in modern financial field. The capital asset pricing model predicts the relationship between asset risk and expected return, which is regarded as the benchmark of modern financial economics [1]. Classical financial theory assumes that the behavior of investors follows the expected utility maximization and The Bayesian law, which ignores the impact of investor sentiment on asset pricing. Investor sentiment affects investors' decisionmaking behaviors, and contributes to the irrational exuberance and panic decline of the stock market in financial bubbles and crisis. [5] they only consider the impact of investor sentiment, which could not fully explain the variation of stock returns [6]. The remainder of this study is organized as follows: the related literatures are reviewed in Sec. 2; Sec. 3 describes the data and explains our research methodology; test results are analyzed in section 4, followed by the possible implications of the findings; a brief summary is given in Sec. 6 eventually
Sign-in/Register to view highlights & summary 
Published Version (
Free)
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.
