The real effects of investor sentiment
By: Christopher Polk, Paola Sapienza.
Contributors: Sapienza, Paola.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10563; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10563.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Stocks -- Prices -- Mathematical models.; Corporations -- Finance -- Mathematical models.; Investments -- Decision making -- Mathematical models.; Organizational behavior -- Mathematical models.
Description: "We study how stock market mispricing might influence individual firms' investment decisions.  We find a positive relation between investment and a number of proxies for mispricing, controlling for investment opportunities and financial slack, suggesting that overpriced (underpriced) firms tend to overinvest (underinvest).  Consistent with the predictions of our model, we find that investment is more sensitive to our mispricing proxies for firms with higher R&D intensity suggesting longer periods of information asymmetry and thus mispricing) or share turnover (suggesting that the firms' shareholders are short-term investors).  We also find that firms with relatively high (low) investment subsequently have relatively low (high) stock returns, after controlling for investment opportunities and other characteristics linked to return predictability.  These patterns are stronger for firms with higher R&D intensity or higher share turnover"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 1/26/2005.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.