A Catering Theory of Investment Policies. Do U.S. firms cater to sentiment?
(2023) BUSN79 20231Department of Business Administration
- Abstract
- The purpose is to investigate retail investors’ growing influence in shaping corporate investment policies. It further seeks to understand whether firms cater to retail investor sentiment. We employ a multiple linear regression model of a strongly-balanced panel data set, incorporating fixed effects and clustered standard errors. We construct a Financial and Economic Attitudes Revealed by Search (“FEARS”) index by aggregating U.S. households' Google search volume data to measure retail investor sentiment. To support our analysis, we review various relevant theories, including market timing, catering, prospect, and herd behavior theories.
Empirical foundation: Our sample data was retrieved from Bloomberg. It consists of 23,712 quarterly... (More) - The purpose is to investigate retail investors’ growing influence in shaping corporate investment policies. It further seeks to understand whether firms cater to retail investor sentiment. We employ a multiple linear regression model of a strongly-balanced panel data set, incorporating fixed effects and clustered standard errors. We construct a Financial and Economic Attitudes Revealed by Search (“FEARS”) index by aggregating U.S. households' Google search volume data to measure retail investor sentiment. To support our analysis, we review various relevant theories, including market timing, catering, prospect, and herd behavior theories.
Empirical foundation: Our sample data was retrieved from Bloomberg. It consists of 23,712 quarterly observations on 741 publicly listed firms on the Nasdaq Composite. In a subsample analysis, we find a significant positive relationship between retail investor sentiment and investment activities before and after the onset of the pandemic. Further, we find an inverse relationship between the FEARS index and VIX, suggesting that retail and institutional investors may influence corporate investment activities differently. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9125530
- author
- Lindquist, Philip LU and Nolén, Nicolas LU
- supervisor
- organization
- course
- BUSN79 20231
- year
- 2023
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- “Retail Investor Sentiment”, “FEARS Index”, “Corporate Investment Policies”, “Behavioral Corporate Finance”, “VIX”
- language
- English
- id
- 9125530
- date added to LUP
- 2023-09-12 16:04:58
- date last changed
- 2023-09-12 16:04:58
@misc{9125530, abstract = {{The purpose is to investigate retail investors’ growing influence in shaping corporate investment policies. It further seeks to understand whether firms cater to retail investor sentiment. We employ a multiple linear regression model of a strongly-balanced panel data set, incorporating fixed effects and clustered standard errors. We construct a Financial and Economic Attitudes Revealed by Search (“FEARS”) index by aggregating U.S. households' Google search volume data to measure retail investor sentiment. To support our analysis, we review various relevant theories, including market timing, catering, prospect, and herd behavior theories. Empirical foundation: Our sample data was retrieved from Bloomberg. It consists of 23,712 quarterly observations on 741 publicly listed firms on the Nasdaq Composite. In a subsample analysis, we find a significant positive relationship between retail investor sentiment and investment activities before and after the onset of the pandemic. Further, we find an inverse relationship between the FEARS index and VIX, suggesting that retail and institutional investors may influence corporate investment activities differently.}}, author = {{Lindquist, Philip and Nolén, Nicolas}}, language = {{eng}}, note = {{Student Paper}}, title = {{A Catering Theory of Investment Policies. Do U.S. firms cater to sentiment?}}, year = {{2023}}, }