Sentiment Metrics and Investor Demand

Sentiment Metrics and Investor Demand

  • LUKE DeVAULT
  • RICHARD SIAS
  • LAURA STARKS

Article first published online: 17th December 2018 DOI: 10.1111/jofi.12754

Abstract


Recent work suggests that sentiment traders shift from safer to more speculative stocks when sentiment increases. Exploiting these cross‐sectional patterns and changes in share ownership, we find that sentiment metrics capture institutional rather than individual investors’ demand shocks. We investigate the underlying economic mechanisms and find that common institutional investment styles (e.g., risk management, momentum trading) explain a significant portion of the relation between institutions and sentiment.

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