Anomalies and investor sentiment: international evidence and the impact of size factor

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SUMMARY

    Using predictive analysis, the authors showed that investor sentiment explains anomalies such as size and investments in the the authors stock market. One decade later, Fama and French detected a correlation between book-to-market ratio and stock returns in the the authors stock market, known as the book-to-market anomaly. Rt - rft=α + β (Rm - rf)t + s(SMB)t + h(HML)t + δ ∆ (S)t + ε, where Ri is return of the anomaly strategy, rf is risk-free rate, Rm - rf is the difference between rf and return of value-weighted market portfolio, SMB is . . .

     

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