The effect of investor sentiment on industries and factors
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School of Business |
Bachelor's thesis
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Date
2020
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Mcode
Degree programme
Rahoitus
Language
en
Pages
22+5
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Abstract
In this research paper, I study the effects of investor sentiment on different industry portfo- lios, industry momentum strategies and stock factors: quality minus junk (QMJ) by (Asness, Frazzini, & Pedersen, 2019) and on long-term reversal factor. All of the analysis is performed on US data. I alternate between three different sources of investor sentiment data to study the differences they propel on the results. I found that some value and equal weighted re- turns industry portolios do exhibit statistically significant return differences between months following a month of high level of investor sentiment, compared to following a month low level of investor sentiment. My study suggest that the returns of industry momentum strate- gies do not differ significantly from the level last months investor sentiment, suggesting there exists no industry wide overpricing on the worst performing industries during a period of high sentiment. The level of industry sentiment of the preceding month has effects on the returns of QMJ factor but the effects are unstable over different sample periods. Lastly, the returns of the long-term reversal factor are not affected by the level of investor sentiment of the prevailing month.Description
Thesis advisor
Michael, UngeheuerKeywords
investor sentiment, long-term reversal, qmj factot, industry momentum