A risk management strategy is proposed as being robust to the Global Financial Crisis (GFC) by selecting a Value-at-Risk (VaR) forecast that combines the forecasts of different VaR models. The robust forecast is based on the median of the point VaR forecasts of a set of conditional volatility...

This paper challenges the prevailing view that investor sentiment is a contrarian predictor of market returns at nearly all horizons. As an important piece of "out-of-sample" evidence, we document that investor sentiment in China is a reliable momentum signal at monthly frequency. The strong...

We use the returns on lottery-like stocks to construct a novel index for investor sentiment in the stock market. This new measure is closely related to previously developed sentiment indicators, but more accurately tracks speculative episodes over the sample period. Using our index, we find that...

We find that investor attention proxies proposed in the literature collectively have a common component that has significant power in predicting stock market risk premium, both in-sample and out-of-sample. This common component is well extracted by using partial least squares, scaled principal...

Recent evidence on the relationship between investor sentiment and subsequent monthly market returns in China shows that investor sentiment is a reliable momentum predictor since an increase (decrease) in investor sentiment leads to higher (lower) future returns. However, we suggest that...

We introduce a flexible utility-based empirical approach to directly determine asset allocation decisions between risky and risk-free assets. This is in contrast to the commonly used two-step approach where least squares optimal statistical equity premium predictions are first constructed to...

We propose an employee sentiment index, which complements investor sentiment and manager sentiment indices, and find that high employee sentiment predicts a subsequent low market return, significant both in- and out-of-sample. The predictability of the employee sentiment index can also deliver...

We provide empirical evidence that the returns on US equity momentum exhibit a time-varying skewness which deepens during dramatic losses (crashes). As a result, the dynamics of the strategy expected returns reflects the time variation in both conditional volatility and skewness. This has first...

Using a wavelet coherence approach, this study investigates the relationship between Bitcoin return and Bitcoin-specifc sentiment from January 1, 2016 to June 30, 2021, covering the COVID-19 pandemic period. The results reveal that before the pandemic, sentiment positively drove prices,...

We construct a momentum factor that identifies cross-sectional winners and losers based on a weighting scheme that incorporates all the price data, over the entire lookback period, as opposed to only the first and last price points of the window. The weighting scheme is derived from the...