Investor Sentiment and the Closed-End Fund Puzzle: Out-of-Sample Evidence

32 Pages Posted: 20 Jun 2004

See all articles by John A. Doukas

John A. Doukas

Old Dominion University - Strome College of Business

Nikolaos T. Milonas

National and Kapodistrian University of Athens - Faculty of Economics; Cardiff University Business School

Multiple version iconThere are 2 versions of this paper

Abstract

In this paper we examine the proposition that small investor sentiment, measured by the change in the discount/premium on closed-end funds, is an important factor in stock returns. We conduct an out-of-sample test of the investor sentiment hypothesis in a market environment that is more likely to be prone to investor sentiment than the USA. We fail to provide supporting evidence for the claim of Lee et al. (1991) that investor sentiment affects the risk of common stocks. Consistent with Elton et al. (1998), who show that investor sentiment does not enter the return generating process, our tests do not detect investor sentiment in a capital market that is more susceptible to small investor sentiment. Our results provide additional support against the claim that investor sentiment represents an independent and systematic asset pricing risk.

Suggested Citation

Doukas, John A. and Milonas, Nikolaos T., Investor Sentiment and the Closed-End Fund Puzzle: Out-of-Sample Evidence. Available at SSRN: https://ssrn.com/abstract=554953

John A. Doukas (Contact Author)

Old Dominion University - Strome College of Business ( email )

2080 Constant Hall
Suite 2080
Norfolk, VA 23529-0222
United States
757-683-5521 (Phone)

HOME PAGE: http://www.efmaefm.org/0DOUKAS/doukas.php

Nikolaos T. Milonas

National and Kapodistrian University of Athens - Faculty of Economics ( email )

8 Pesmazoglou street
GR-10559 Athens
Greece

Cardiff University Business School

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
26
Abstract Views
1,787
PlumX Metrics