Relative Investor Sentiment
32 Pages Posted: 2 Jun 2022 Last revised: 16 Jun 2023
There are 2 versions of this paper
Relative Investor Sentiment
Relative Investor Sentiment Measurement
Date Written: May 24, 2022
Abstract
We propose a new investor sentiment index by estimating the differences between moments from realized stock returns and option-implied moments. We show that our index is unrelated to canonical risk factors such as market risk, firm size, value, or profitability. Conversely, momentum strategies perform significantly better during high sentiment periods. Our methodology can be extended to a daily sentiment measure and stock-specific sentiment indices.
Keywords: Option-implied moments, Investor sentiment, Momentum
JEL Classification: G12, G14, G58
Suggested Citation: Suggested Citation