Does Manager Sentiment Affect Stock Returns?

The stock price will be affected by market sentiment and deviate from its original value.Many scholars have described investor sentiment.For example,Baker Wurgler's sentiment indicators have been widely used at home and abroad.However,managers know much more about the company than outside investors,and their emotions are affected by behavioral biases,just as outside investors,that is,they may be too optimistic or pessimistic,leading to unreasonable market results Therefore,it is important to study the emotions of managers.The higher sentiment of managers may cause them to overestimate the speculative nature of the market.When real economic fundamentals are gradually disclosed to the market,wrong valuations will decrease and stock prices will reverse,leading to lower future stock returns.But does this assumption hold true in the stock market? If impact does exist,what is the specific impact path? In which companies is this impact more pronounced? Is there a connection between manager sentiment and investor sentiment? These are all issues worthy of further study.The dissertation first studies the effect of company-level managerial sentiment on future stock returns,and explores the specific performance of this effect in companies with different characteristics;then it proves that there is no lead-lag relationship between investor sentiment and managerial sentiment;finally finds the mediating variables of managerial mood affecting future stock returns.Based on this,the paper combs the literature on managerial sentiment at home and abroad,and comprehensively and objectively selects the text analysis results of management discussion and analysis as the managerial sentiment indicator,and further studies the influence of managerial sentiment on the future stock market.Taking all Chinese A-share listed companies from 2007 to 2017 as the research object,we obtained 53416 quarterly data of 1214 companies.The regression analysiswas used to test the effect of managerial sentiment on stock returns.Then,the entire sample was classified according to stock type and corporate attributes.The classification explores the relationship between manager sentiment and stock returns in different classification states.Then,given the existence of a large number of scholars in the market who study the impact of investor sentiment on the stock market and formed a complete theoretical system,the paper will take a comparative analysis of investor sentiment was made.Finally,a three-step test was used to find the intermediary mechanism of managerial sentiment affecting stock returns.In the robustness test,variables were replaced for managers' sentiment and stock return indicators,and the role of the two was proved again,and the mediation effect was verified using the Bootstrap method.The results show that:(1)Managers' negative sentiment predicts stock returns in the next period;(2)In negative arbitrage costs,higher value,and more speculative companies and non-state-owned enterprises,such negative predictions stronger ability;(3)Manager's sentiment is not an incidental factor of existing investor sentiment;(4)Manager's misprediction of future cash flow is the main reason leading to negative sentiment of managers' sentiment on stock returns;(5)Managers' emotions during the period of high investor sentiment will significantly enhance the negative predictive effect on stock returns.The research conclusions supplement the existing asset pricing theory,further enrich the relevant literature on text analysis and behavioral finance,and provide specific policy references for stakeholders and regulators.