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Re-examining risk premiums in the Fama–French model: The role of investor sentiment
This paper reconstructs the Fama–French three-factor (F–F) model as a panel smooth transition regression (PSTR) framework to investigate the differentiated effects of investor sentiment proxies-the volatility index (VIX), credit default swap (CDS), and TED spread-on the three risk premiums. Sample p...
Autores principales: | , , |
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Formato: | Online Artículo Texto |
Lenguaje: | English |
Publicado: |
Elsevier Inc.
2016
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Materias: | |
Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7147913/ http://dx.doi.org/10.1016/j.najef.2015.12.002 |
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author | Wu, Po-Chin Liu, Shiao-Yen Chen, Che-Ying |
author_facet | Wu, Po-Chin Liu, Shiao-Yen Chen, Che-Ying |
author_sort | Wu, Po-Chin |
collection | PubMed |
description | This paper reconstructs the Fama–French three-factor (F–F) model as a panel smooth transition regression (PSTR) framework to investigate the differentiated effects of investor sentiment proxies-the volatility index (VIX), credit default swap (CDS), and TED spread-on the three risk premiums. Sample period spans from 2003: 1Q to 2013: 4Q. Sample objects are 58 semiconductor companies listed on Taiwan Security Exchange Corporation. The empirical results report that stock returns display a nonlinear path, and the three risk premiums are time-varying, depending on different proxies of investor sentiment in different regimes. Market premiums fall as investors in stock markets show extreme optimism or extreme pessimism. Except in rare situations, the size premium is significant and decreases with the increase in the VIX. Returns in holding growth stocks dominate holding value stocks when the investors show extreme pessimism or optimism. However, in normal sentiment of investment, value stocks earn more returns than growth stocks. |
format | Online Article Text |
id | pubmed-7147913 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2016 |
publisher | Elsevier Inc. |
record_format | MEDLINE/PubMed |
spelling | pubmed-71479132020-04-13 Re-examining risk premiums in the Fama–French model: The role of investor sentiment Wu, Po-Chin Liu, Shiao-Yen Chen, Che-Ying The North American Journal of Economics and Finance Article This paper reconstructs the Fama–French three-factor (F–F) model as a panel smooth transition regression (PSTR) framework to investigate the differentiated effects of investor sentiment proxies-the volatility index (VIX), credit default swap (CDS), and TED spread-on the three risk premiums. Sample period spans from 2003: 1Q to 2013: 4Q. Sample objects are 58 semiconductor companies listed on Taiwan Security Exchange Corporation. The empirical results report that stock returns display a nonlinear path, and the three risk premiums are time-varying, depending on different proxies of investor sentiment in different regimes. Market premiums fall as investors in stock markets show extreme optimism or extreme pessimism. Except in rare situations, the size premium is significant and decreases with the increase in the VIX. Returns in holding growth stocks dominate holding value stocks when the investors show extreme pessimism or optimism. However, in normal sentiment of investment, value stocks earn more returns than growth stocks. Elsevier Inc. 2016-04 2015-12-28 /pmc/articles/PMC7147913/ http://dx.doi.org/10.1016/j.najef.2015.12.002 Text en Copyright © 2015 Elsevier Inc. All rights reserved. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active. |
spellingShingle | Article Wu, Po-Chin Liu, Shiao-Yen Chen, Che-Ying Re-examining risk premiums in the Fama–French model: The role of investor sentiment |
title | Re-examining risk premiums in the Fama–French model: The role of investor sentiment |
title_full | Re-examining risk premiums in the Fama–French model: The role of investor sentiment |
title_fullStr | Re-examining risk premiums in the Fama–French model: The role of investor sentiment |
title_full_unstemmed | Re-examining risk premiums in the Fama–French model: The role of investor sentiment |
title_short | Re-examining risk premiums in the Fama–French model: The role of investor sentiment |
title_sort | re-examining risk premiums in the fama–french model: the role of investor sentiment |
topic | Article |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7147913/ http://dx.doi.org/10.1016/j.najef.2015.12.002 |
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