Relative Investor Sentiment

32 Pages Posted: 2 Jun 2022 Last revised: 16 Jun 2023

See all articles by Xiang Gao

Xiang Gao

Shanghai Business School

Kees Koedijk

Utrecht University

Thomas Walther

Utrecht University - School of Economics; Dresden University of Technology - Faculty of Economics and Business Management

Zhan Wang

Research Center of Finance, Shanghai Business School

Multiple version iconThere are 2 versions of this paper

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

Gao, Xiang and Koedijk, Kees and Walther, Thomas and Wang, Zhan, Relative Investor Sentiment (May 24, 2022). Available at SSRN: https://ssrn.com/abstract=4122594 or http://dx.doi.org/10.2139/ssrn.4122594

Xiang Gao

Shanghai Business School ( email )

Shanghai Business School
2271 West Zhongshan Road
Shanghai, 200235
China

Kees Koedijk

Utrecht University ( email )

Vredenburg 138
Utrecht, 3511 BG
Netherlands
+31655186755 (Phone)

Thomas Walther (Contact Author)

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC
Netherlands

HOME PAGE: http://www.thomas-walther.info

Dresden University of Technology - Faculty of Economics and Business Management ( email )

Mommsenstrasse 13
Dresden, D-01062
Germany

HOME PAGE: http://www.tu-dresden.de/wiwi/finance

Zhan Wang

Research Center of Finance, Shanghai Business School ( email )

2271 West Zhong Shan Road
Shanghai, Shanghai 200235
China

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