Barberis, N., Shleifer, A., & Vishny, R. (1997). A Model of Investor Sentiment.

Recent empirical research in finance has uncovered two families of pervasive regularities: underreaction of stock prices to news such as earnings announcements; and overreaction of stock prices to a series of good or bad news. In this paper, we present a parsimonious model of investor sentiment that is, of how investors form beliefs that is consistent with the empirical findings… [Read More]