Aggregate investor sentiment and stock return synchronicity

Timothy K. Chue, Ferdinand A. Gul, G. Mujtaba Mian

Research output: Journal article publicationJournal articleAcademic researchpeer-review

18 Citations (Scopus)


We show that the returns of individual stocks become more synchronous with the aggregate market during periods of high investor sentiment. We also document that the effect of sentiment on stock return synchronicity is especially pronounced for small, young, volatile, non-dividend-paying and low-priced stocks. This ‘difference in difference’ suggests that stocks with these characteristics are affected more by sentiment—consistent with previous studies. Our results support the hypothesis that greater constraints on arbitrage and the prevalence of sentiment-driven demand during periods of high sentiment lead to increased comovement among stocks.

Original languageEnglish
Article number105628
JournalJournal of Banking and Finance
Publication statusPublished - Nov 2019


  • Aggregate investor sentiment
  • Cross-sectional difference
  • Stock return synchronicity
  • Time-series variation

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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