TITLE:
Investor Sentiment and Size Effect
AUTHORS:
Ge Li
KEYWORDS:
Investor Sentiment, Size Effect, Small Stocks, Size Premium, Size Factor, Risk Compensation
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.8 No.7,
July
24,
2020
ABSTRACT: This paper
uses the two-stage least square method and uses the monthly data of investor sentiment
and size effect from 2003 to 2019. Different from the linear model used in previous
studies, this paper, based on the nonlinear model, explores the relationship between
investor sentiment and size effect. The study
finds that investor sentiment has explanatory power to size effect and they take
on an inverted U-shaped relationship. Compared
with the rising period of investor sentiment, the falling period of investor sentiment
is more sensitive to size effect. In addition,
this paper uses an alternative variable ISI of investor sentiment, and its
empirical results are still robust.