Answering Financial Anomalies: Sentiment-Based Stock Pricing

Autor: Arun J. Prakash, Edward R. Lawrence, George M. McCabe
Rok vydání: 2007
Předmět:
Zdroj: Journal of Behavioral Finance. 8:161-171
ISSN: 1542-7579
1542-7560
DOI: 10.1080/15427560701547248
Popis: The efficient market hypothesis (EMH) assumes that investors are rational and value securities rationally. A rational investor would value a security by its net present value; the price of a stock in this framework is based on the discounted cash flow or the present value model. Although the EMH-based model is partially successful in computing fundamental stock prices, other anomalies such as high trading volume, high volatility, and stock market bubbles remain unexplained. These models assume rational investors who are utility maximizers. But some investors behave irrationally or against the predictions, and in the aggregate they become irrelevant. In this paper, we relax the assumption of investor rationality, and attempt to explain high volatility, high trading volume, and stock market bubbles by incorporating investor sentiment into the already existing asset pricing model.
Databáze: OpenAIRE
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