Excess Stock Return Comovements and the Role of Investor Sentiment

Download or read book Excess Stock Return Comovements and the Role of Investor Sentiment written by Bart Frijns and published by . This book was released on 2017 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates whether investor sentiment can explain stock return comovements. Our findings demonstrate that since the 1960s, there has been a clear and rapid increase in correlations between international equity markets. Decomposing the equity returns into fundamental and non-fundamental components reveals that the increased correlation is driven by the non-fundamental part. We find that stock return comovements are mainly driven by investor sentiment, which explains the level, variance, and covariance of the non-fundamental component of returns.