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Bridge over ocean
1 July 2010 Financial Analysts Journal Volume 66, Issue 4

Relative Sentiment and Stock Returns

  1. Roger M. Edelen
  2. Alan J. Marcus
  3. Hassan Tehranian

The sentiment of retail investors relative to that of institutional investors was measured by comparing their respective portfolio allocations to equity versus cash and fixed-income securities. The results suggest that fluctuations in retail sentiment are a primary driver of equity valuations for reasons unrelated to fundamentals.

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