Abstract
We use retail structured equity product (SEP) issuances to construct a new sentiment measure for large capitalization stocks. The SEP sentiment measure predicts negative abnormal returns on the SEP reference stocks based on a variety of factor models, and also predicts returns in Fama-MacBeth regressions that include a wide range of covariates. Consistent with our interpretation that SEP issuances reflect investor sentiment, aggregate SEP issuances are highly correlated with the Baker-Wurgler sentiment index. Tobit regressions reveal that proxies for attention and sentiment predict SEP issuance volumes, providing additional evidence consistent with the hypothesis that SEP issuances reflect sentiment.
Original language | English (US) |
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Pages (from-to) | 2365-2407 |
Number of pages | 43 |
Journal | Journal of Finance |
Volume | 78 |
Issue number | 4 |
DOIs | |
State | Published - Aug 2023 |
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics