TY - JOUR
T1 - The long of it
T2 - Odds that investor sentiment spuriously predicts anomaly returns
AU - Stambaugh, Robert F.
AU - Yu, Jianfeng
AU - Yuan, Yu
N1 - Publisher Copyright:
© 2014 Elsevier B.V.
PY - 2014
Y1 - 2014
N2 - Extremely long odds accompany the chance that spurious-regression bias accounts for investor sentiment's observed role in stock-return anomalies. We replace investor sentiment with a simulated persistent series in regressions reported by Stambaugh, Yu, and Yuan (2012), who find higher long-short anomaly profits following high sentiment, due entirely to the short leg. Among 200 million simulated regressors, we find none that support those conclusions as strongly as investor sentiment. The key is consistency across anomalies. Obtaining just the predicted signs for the regression coefficients across the 11 anomalies examined in the above study occurs only once for every 43 simulated regressors.
AB - Extremely long odds accompany the chance that spurious-regression bias accounts for investor sentiment's observed role in stock-return anomalies. We replace investor sentiment with a simulated persistent series in regressions reported by Stambaugh, Yu, and Yuan (2012), who find higher long-short anomaly profits following high sentiment, due entirely to the short leg. Among 200 million simulated regressors, we find none that support those conclusions as strongly as investor sentiment. The key is consistency across anomalies. Obtaining just the predicted signs for the regression coefficients across the 11 anomalies examined in the above study occurs only once for every 43 simulated regressors.
KW - Anomalies
KW - Investor sentiment
KW - Spurious regressors
UR - http://www.scopus.com/inward/record.url?scp=84927645787&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84927645787&partnerID=8YFLogxK
U2 - 10.1016/j.jfineco.2014.07.008
DO - 10.1016/j.jfineco.2014.07.008
M3 - Article
AN - SCOPUS:84927645787
SN - 0304-405X
VL - 114
SP - 613
EP - 619
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 3
ER -