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ECIN Replication Package for "Re-examining Investor Sentiment and Stock Returns: A Replication and Extension of Baker & Wurgler (2006)"

Name: ECIN Replication Package for "Re-examining Investor Sentiment and Stock Returns: A Replication and Extension of Baker & Wurgler (2006)"
Published: 2024-12-29
License: https://creativecommons.org/licenses/by/4.0

Principal Investigator(s): View help for Principal Investigator(s) Huailu Li, Fudan University

Version: View help for Version V2

Name	File Type	Size	Last Modified
China-Data-and-Stata-Code			12/29/2024 08:28:AM
US-Data-and-Stata-Code			12/29/2024 09:34:AM
README_CHINA.pdf	application/pdf	442.1 KB	12/28/2024 07:06:PM
README_US.pdf	application/pdf	337.6 KB	12/29/2024 03:17:AM

Project Citation:

Li, Huailu. ECIN Replication Package for “Re-examining Investor Sentiment and Stock Returns: A Replication and Extension of Baker & Wurgler (2006).” Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2025-01-06. https://doi.org/10.3886/E214361V2

Project Description

Summary: This study replicates and extends Baker and Wurgler’s (2006) analysis of investor sentiment’s impact on stock returns. We confirm their findings by showing the significant cross-sectional effect of sentiment in both their original sample (1963–2002) and a new sample (2002–2023). Expanding the scope, we introduce a monthly sentiment measure and analyze the U.S. and Chinese markets (2002–2023). Our results reveal that the predictive strength of sentiment indicators shift or invert over time. In the Chinese market, the expected cross-sectional effects of sentiment disappear when the foundational premise - variance in stock valuation and arbitrage difficulty - is not met.

Scope of Project

JEL Classification:
      D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
      G11 Portfolio Choice; Investment Decisions
      G14 Information and Market Efficiency; Event Studies; Insider Trading
      G15 International Financial Markets

Manuscript Number: ECIN-Jan-2024-0054

Geographic Coverage: U.S, China

Time Period(s): 1963 – 2022

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