We construct investor sentiment indices for six major stock markets and decompose them into one global and six local indices. In a validation test, we find that relative sentiment is correlated with the relative prices of dual-listed companies. Global sentiment is a contrarian predictor of...

Market-wide attention-grabbing events -- record levels for the Dow and front-page articles about the stock market -- predict the trading behavior of investors and, in turn, market returns. Both aggregate and household-level data reveal that high market-wide attention events lead investors to...

This study documents the influence of investor sentiment on the market's mean-variance tradeoff. We find that the stock market's expected excess return is positively related to the market's conditional variance in low-sentiment periods but unrelated to variance in high-sentiment periods. These...

Real investors and markets are too complicated to be neatly summarized by a few selected biases and trading frictions. The quot;top downquot; approach to behavioral finance focuses on the measurement of reduced form, aggregate sentiment and traces its effects to stock returns. It builds on the...

Empirical evidence of imperfect integration across world capital markets suggests a role for cross-border arbitrage by multinationals. Consistent with multinational arbitrage as a determinant of foreign direct investment (FDI) patterns, we find that FDI flows increase sharply with source-country...

Classical models predict that the division of stock returns into dividends and capital appreciation does not affect investor consumption patterns, while naive quot;spend income, not principalquot; mental accounting rules and other economic frictions can cause investors to have a higher...

We study how investor sentiment affects the cross-section of stock returns. We predict that a wave of investor sentiment has larger effects on securities whose valuations are highly subjective and difficult to arbitrage. Consistent with this prediction, we find that when beginning-of-period...

It is well known that firms are more likely to issue equity when their market values are high, relative to book and past market values, and to repurchase equity when their market values are low. We document that the resulting effects on capital structure are very persistent. As a consequence,...

The share of equity issues in total new equity and debt issues is a strong predictor of U.S. stock market returns between 1928 and 1997. In particular, firms issue relatively more equity than debt just before periods of low market returns. The equity share in new issues has stable predictive...

Many studies find that aggregate managerial decision variables, such as aggregate equity issuance, predict stock or bond market returns. Recent research argues that these findings may be driven by an aggregate time-series version of Schultz s (2003) pseudo market-timing bias. Using standard...