Edwin J Elton, Martin J Gruber, Jeffrey A Busse
ABSTRACT
Results of recent research indicate small investor sentiment, as measured
by the change in the discount on closed-end funds, is an important factor
in the return generating process for common stocks. We find no evidence
of it being an important factor in the return generating process. We next
examine its impact on expected returns and whether one set of firms with
high sensitivity to this factor, closed-end funds, offers, and can be expected
to offer, a higher expected return. Our findings do not support small investor
sentiment as a priced factor, either in common stocks or closed-end funds.
Subject: Factor Models (Empirical)
Elton: (212) 998-0361 eelton@stern.nyu.edu
Gruber: (212) 998-0333
Busse: (212) 998-0562
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