The impact of rational and irrational sentiments of individual and institutional investors on DJIA and S&P500 index returns

References

• Baker , M and Wurgler , J . 2003 . Investor sentiment and cross-section of stock returns Working Paper, Harvard Business School
   Google Scholar
• Barberis , N , Shleifer , A and Vishny , RW . 1998 . A model of investor sentiment . Journal of Financial Economics , 49 : 307 – 43 .
   Web of Science ®Google Scholar
• Black , F . 1986 . Noise . Journal of Finance , 41 : 529 – 43 .
   Web of Science ®Google Scholar
• Brown , GW and Cliff , MT . 2004a . Investor sentiment and the near-term stock market . Journal of Empirical Finance , 11 : 1 – 27 .
   Google Scholar
• Brown , GW and Cliff , MT . 2004b . Investor sentiment and asset valuation . Journal of Business , (forthcoming)
   Google Scholar
• Campbell , JY . 1987 . Stock returns and the term structure . Journal of Financial Economics , 18 : 373 – 99 .
   Web of Science ®Google Scholar
• Campbell , JY . 1991 . A variance decomposition for stock returns . Economic Journal , 101 : 157 – 79 .
   Web of Science ®Google Scholar
• Campbell , JY and Kyle , AS . 1993 . Smart money, noise trading, and stock price behavior . Review of Economic Studies , 60 : 1 – 34 .
   Web of Science ®Google Scholar
• Campbell , JY and Shiller , RJ . 1988a . The dividend-price ratio and expectations of future dividends and discount factors . Review of Financial Studies , 1 : 195 – 228 .
   Web of Science ®Google Scholar
• Campbell , JY and Shiller , RJ . 1988b . Stock prices, earnings and expected dividends . Journal of Finance , 43 : 661 – 76 .
   Web of Science ®Google Scholar
• Chan , N , Kan , R and Miller , M . 1993 . Are the discounts on closed-end funds a sentiment index? . Journal of Finance , 48 : 795 – 800 .
   Google Scholar
• Clarke , RG and Statman , M . 1998 . Bullish or bearish? . Financial Analysts Journal , 54 : 63 – 72 .
   Google Scholar
• Daniel , K , Hirshleifer , D and Subrahmanyam , A . 1998 . Investor psychology and security market under- and over-reactions . Journal of Finance , 53 : 1839 – 86 .
   Web of Science ®Google Scholar
• DeBondt , W . 1993 . Betting on trends: intuitive forecasts of financial risk and return . International Journal of Forecasting , 9 : 355 – 71 .
   Web of Science ®Google Scholar
• DeLong , J , Shleifer , A , Summers , H and Waldmann , R . 1990 . Noise trader risk in financial markets . Journal of Political Economy , 98 : 703 – 38 .
   Web of Science ®Google Scholar
• DeLong , J , Shleifer , A , Summers , H and Waldmann , R . 1991 . The survival of noise traders in financial markets . Journal of Business , 64 : 1 – 19 .
   Google Scholar
• Dickey , DA and Fuller , WA . 1979 . Distribution of the estimators for autoregressive time series with a unit root . Journal of the American Statistical Association , 74 : 427 – 31 .
   Web of Science ®Google Scholar
• Dickey , DA and Fuller , WA . 1981 . Likelihood ratio statistics for autoregressive time series with a unit root . Econometrica , 49 : 1057 – 72 .
   Web of Science ®Google Scholar
• Diebold , FX . 2003 . Elements of Forecasting , Canada : South Western College Publishing .
   Google Scholar
• Doan , T . 1988 . RATS User's Manual VAR Econometrics, Evanston, Illinois
   Google Scholar
• Doan , T and Litterman , R . 1986 . User's Manual RATS: Version 2.0 VAR Econometrics, Evanston, IL
   Google Scholar
• Dolado , JJ , Jenkinson , T and Sosvilla-Rivero , S . 1990 . Cointegration and unit roots . Journal of Economic Surveys , 4 : 249 – 73 .
   Google Scholar
• Elton , EJ and Gruber , MJ . 1991 . Modern Portfolio Theory and Investment Analysis , 4th , New Jersey : John Wiley and Sons, Inc. .
   Google Scholar
• Elton , EJ , Gruber , MJ and Busse , JA . 1998 . Do investors care about sentiments? . Journal of Business , 71 : 477 – 500 .
   Google Scholar
• Enders , W . 2003 . Applied Econometrics Time Series John Wiley and Sons Inc., New Jersey
   Google Scholar
• Fama , EF . 1970 . Efficient capital markets: a review of theory and empirical work . Journal of Finance , 25 : 383 – 417 .
   Web of Science ®Google Scholar
• Fama , EF . 1976 . Foundations of Finance , New York : Basic Books .
   Google Scholar
• Fama , EF . 1990 . Term structure forecasts of interest rates, inflation, and real returns . Journal of Monetary Economics , 25 : 59 – 76 .
   Web of Science ®Google Scholar
• Fama , EF and French , KR . 1988 . Dividend yields and expected stock returns . Journal of Financial Economics , 22 : 3 – 25 .
   Web of Science ®Google Scholar
• Fama , EF and French , KR . 1989 . Business conditions and expected returns on stocks and bonds . Journal of Financial Economics , 25 : 23 – 49 .
   Web of Science ®Google Scholar
• Fama , EF and French , KR . 1993 . Common risk factors in the returns on stocks and bonds . Journal of Financial Economics , 33 : 3 – 56 .
   Web of Science ®Google Scholar
• Fama , EF and Schwert , GW . 1977 . Asset returns and inflation . Journal of Financial Economics , 5 : 115 – 46 .
   Web of Science ®Google Scholar
• Ferson , WE and Campbell , RH . 1991 . The variation in economic risk premiums . Journal of Political Economy , 99 : 385 – 415 .
   Web of Science ®Google Scholar
• Fisher , KL and Statman , M . 2000 . Investor sentiments and stock returns . Financial Analysts Journal , 56 : 16 – 23 .
   Google Scholar
• Gemmill , G and Thomas , CD . 2002 . Noise trading, costly arbitrage, and asset prices: evidence from closed-end funds . Journal of Finance , 6 : 2571 – 94 .
   Google Scholar
• Genberg , H , Salemi , MK and Swoboda , A . 1987 . The relative importance of foreign and domestic disturbances for aggregate fluctuations in open economy: Switzerland . Journal of Monetary Economics , 19 : 45 – 67 .
   Web of Science ®Google Scholar
• Hakkio , CS and Morris , CS . 1984 . Autoregressions: a user's guide Research Working Paper, Federal Reserve Bank of Kansas City, 84–10
   Google Scholar
• Hamilton , JD . 1994 . Time Series Analysis , Princeton, NJ : Princeton University Press .
   Google Scholar
• Hirshleifer , D . 2001 . Investor psychology and asset pricing . Journal of Finance , 56 : 1533 – 97 .
   Web of Science ®Google Scholar
• Hodrick , R . 1992 . Dividend yields and expected stock returns: alternative procedures for inference and measurement . Review of Financial Studies , 5 : 357 – 86 .
   Web of Science ®Google Scholar
• Hong , H and Stein , JC . 1999 . A unified theory of underreaction, momentum trading and overreaction in asset markets . Journal of Finance , 54 : 2143 – 84 .
   Web of Science ®Google Scholar
• Jegadeesh , N and Titman , S . 1993 . Returns to buying winners and selling losers: implications for stock market efficiency . Journal of Finance , 48 : 65 – 91 .
   Web of Science ®Google Scholar
• Keim , DB and Stambaugh , RF . 1986 . Predicting returns in the bond and stock markets . Journal of Financial Economics , 17 : 357 – 90 .
   Web of Science ®Google Scholar
• Koop , G , Pesaran , MH and Potter , SM . 1996 . Impulse response analysis in non linear multivariate models . Journal of Econometrics , 74 : 119 – 47 .
   Web of Science ®Google Scholar
• Lakonishok , J , Shleifer , A and Vishny , RW . 1991 . Do institutional investors destabilize stock prices? Evidence on herding and feedback trading Working Paper, NBER, 3846
   Google Scholar
• Lee , C , Shleifer , A and Thaler , R . 1991 . Investor sentiment and the closed-end fund puzzle . Journal of Finance , 46 : 75 – 109 .
   Web of Science ®Google Scholar
• Lee , WY , Jiang , CX and Indro , DC . 2002 . Stock market volatility, excess returns, and the role of investor sentiments . Journal of Banking & Finance , 26 : 2277 – 99 .
   Web of Science ®Google Scholar
• Lintner , J . 1965 . Security prices risk, and maximal gains from diversification, Journal of Finance, 587–615
   Google Scholar
• Litterman , RB . 1984 . Forecasting with Bayesian vector autoregressions – five years of experience Staff Report, Federal Reserve Bank of Minneapolis, 95
   Google Scholar
• Litterman , RB and Supel , TM . 1983 . Using vector autoregressions to measure the uncertainty in Minnesota's revenue forecasts . Quarterly Review, Federal Reserve Bank of Minneapolis , 7 : 10 – 22 .
   Google Scholar
• Lupoletti , WM and Webb , RH . 1986 . Defining and improving the accuracy of macroeconomic forecasts: contributions from a VAR model . Journal of Business , 59 : 263 – 85 .
   Web of Science ®Google Scholar
• Neal , R and Wheatley , S . 1998 . Do measures of investor sentiments predict stock returns? . Journal of Financial and Quantitative Analysis , 34 : 523 – 47 .
   Google Scholar
• Palomino , F . 1996 . Noise trading in small markets . Journal of Finance , 51 : 1537 – 50 .
   Web of Science ®Google Scholar
• Pesaran , MH and Shin , Y . 1996 . Cointegration and speed of convergence to equilibrium . Journal of Econometrics , 71 : 117 – 43 .
   Web of Science ®Google Scholar
• Pesaran , MH and Shin , Y . 1998 . Generalized impulse response analysis in linear multivariate models . Economics Letters , 58 : 17 – 29 .
   Web of Science ®Google Scholar
• Schwert , GW . 1990 . Stock returns and real activity: a century of evidence . Journal of Finance , 45 : 1237 – 57 .
   Web of Science ®Google Scholar
• Sharpe , SA . 2002 . Reexamining stock valuation and inflation: the implications of analysts’ earnings forecasts . The Review of Economics and Statistics , 84 : 632 – 48 .
   Web of Science ®Google Scholar
• Sharpe , WF . 1964 . Capital asset prices: a theory of market equilibrium under conditions of risk . Journal of Finance , 19 : 425 – 42 .
   Web of Science ®Google Scholar
• Shefrin , H and Statman , M . 1994 . Behavioral capital asset pricing theory . The Journal of Financial and Quantitative Analysis , 29 : 323 – 49 .
   Web of Science ®Google Scholar
• Shleifer , A and Summers , L . 1990 . The noise trader approach to finance . Journal of Economic Perspectives , 4 : 19 – 33 .
   Web of Science ®Google Scholar
• Sias , RW , Starks , LT and Tinic , SM . 2001 . Is noise trader risk priced? . The Journal of Financial Research , 24 : 311 – 29 .
   Google Scholar
• Sims , C . 1980 . Macroeconomic and reality . Econometrica , 48 : 1 – 49 .
   Web of Science ®Google Scholar
• Solt , ME and Statman , M . 1988 . How useful is the sentiment index? . Financial Analysts Journal , 44 : 45 – 55 .
   Google Scholar
• Swaminathan , B . 1996 . Time-varying expected small firm returns and closed-end fund discounts . Review of Financial Studies , 9 : 845 – 87 .
   Web of Science ®Google Scholar
• Trueman , B . 1988 . A theory of noise trading in securities markets . Journal of Finance , 43 : 83 – 95 .
   Web of Science ®Google Scholar
• Wang , FA . 2001 . Overconfidence, investor sentiment, and evolution . Journal of Financial Intermediation , 10 : 138 – 70 .
   Web of Science ®Google Scholar
• Webb , RH . 1999 . Two approaches to macroeconomic forecasting . Economic Quarterly, Federal Reserve Bank of Richmond , 85 : 23 – 40 .
   Google Scholar