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References
Editor’s note: Larry Swedroe will be helping us accomplish our mission to empower investors through education with commentary and research summaries. We hope you enjoy and always remember that you can sign up for automatic updates on our blog here.
Investor sentiment is the propensity of individuals to trade on noise and emotions rather than facts. A measure of investor sentiment was created by two researchers, Malcolm Baker and Jeffrey Wurgler. They constructed an investor sentiment index based on six measures: trading volume as measured by NYSE turnover; the dividend premium (the difference between the average market-to-book ratio of dividend-payers and non-payers); the closed-end fund discount; the number and first-day returns on IPOs; and the equity share in new issues. Data is available at www.stern.nyu.edu/~jwurgler.
Alpha Architect has a good summary of the debate here.
David Blitz has an interesting new paper that suggests this might be less of an issue than previously thought — review of paper here.
Article by Larry Swedroe, Alpha Architect
