Competition among them leads to a balance in which prices equal the reasonably inexpensive value of expected cash flows, and in which the cross-section of predictable returns depends only on the cross-section of systematic risks. Even if some investors are irrational, classical theory argues, their strain are offset by arbitrageurs with no momentous impact on prices. In this paper, we present evidence that investor sentiment may have major effects on the cross-section of stock prices.
Investment sentiments with in the stock market and the effect of investor emotions on stock returns are certainly the first issue that investors should consider. At the outset, investing is an act of faith, a willingness to postpone present consumption and save for the future. Investing for the long term is central to the achievement of optimal returns by investors. ...Show more