Abstract
We develop an investor sentiment index that captures the investor behaviour and analyses its suitability in explaining asset prices after augmenting it in multifactor asset pricing models. Seven different proxies including Sensex P/E ratios , dividend premium, modified advances to declines ratio, number of new equity issues, ratio of total equity issues to total equity and debt issues, turnover of BSE and volatility premium have been utilized. The investor sentiment index thus created mimics the movement of Sensex. Investor sentiment finds significance in explaining the returns for most of the portfolio under the different multifactor models. Fama–French three-factor model again lags in explaining the portfolio returns while Carhart four-factor model and residual momentum factor model match in performance for explaining stock returns.
When the first primitive man decided to use a bone for a club instead of eating its marrow, that was investment
Anonymous
The contents of this chapter are from a paper written by Raj S. Dhankar and Devesh Shankar, Faculty of Management Studies, University of Delhi, Delhi-110007 titled “Investor Sentiment Augmented Multi-Factor Models: Evidence from India”. The author acknowledges the inputs received by Devesh Shankar, without which this chapter would not have been completed.
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Dhankar, R.S. (2019). Investor Sentiment and Investment Decision-Making. In: Risk-Return Relationship and Portfolio Management. India Studies in Business and Economics. Springer, New Delhi. https://doi.org/10.1007/978-81-322-3950-5_20
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DOI: https://doi.org/10.1007/978-81-322-3950-5_20
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