Does Investor Sentiment Affect the Value Relevance of Accounting Information?

• He, Wen ; Hong, Ki Hoon ^[1] ; Wu, Eliza ^[2]
  1. [1] Hongik University

     Hongik University

     Corea del Sur

     
  2. [2] University of Sydney

     University of Sydney

     Australia

     
• Localización: Abacus: A journal of accounting, finance and business studies, ISSN 0001-3072, Vol. 56, Nº 4, 2020, págs. 535-560
• Idioma: inglés
• DOI: 10.1111/abac.12203
• Texto completo no disponible (Saber más ...)
• Resumen

  • We investigate whether investor sentiment affects the relationships between accounting variables and contemporaneous stock returns. Using price-relevant accounting variables identified by Chen and Zhang (2007) and the investor sentiment index constructed by Baker and Wurgler (2006), we find that the value relevance of accounting variables is collectively lower in high sentiment periods than in low sentiment periods. More importantly, earnings yield appears to be more related to contemporaneous stock returns in high sentiment periods, while other accounting variables are more related to stock returns in low sentiment periods. The effect of investor sentiment on the value relevance of accounting information is stronger for firms that are more difficult to value and to arbitrage.