TY  - JOUR
T1  - Sentiment Bubbles
JF  - Journal of Financial Markets
Y1  - 2015
A1  - Berger,Dave
A1  - Turtle,Harry
KW  - Finance
AB  - We examine cumulative changes in investor sentiment and find that these changes relate to extended periods of increasing overvaluation, followed by price corrections. The relation between sentiment and returns is path dependent—short-term increases in sentiment precede strong positive returns, while prolonged periods of increasing sentiment precede negative returns. Positive short-run returns are consistent with bubble dynamics and mitigate the backwards induction conundrum described by Abreu and Brunnermeier (2003). Our results hold for the market portfolio, and are especially strong for opaque portfolios with high levels of uncertainty, as well as portfolios with greater market frictions that limit arbitrage.
VL  - 23
U2  - a
U4  - 57419835392
ID  - 57419835392
ER  -