Habits and sentiment are key psychological behaviors in asset pricing. This paper studies the interactive impacts of sentiment and habits on asset pricing using the Campbell and Cochrane 1999 habit model as a framework model. A positive sentiment shock emanating from firms is modeled in the...

Estimates of risk premium derived from classical financial theory have consistently shown deviations from the observed levels. These limitations have been linked to the rational foundations of these theories that rely on asset prices as the main source of information. This article focuses on the...

This study explores the nexus between investors’ sentiments and herding behavior toward the market consensus in the U.S. and Europe stock markets from January, 2005 to April, 2021. We document strong evidence of herding during periods characterized by high level of sentiments. Our results...