Heejin Yang

Investor sentiment, trading behavior and stock returns

ABSTRACT This article examines how investor sentiment and trading behaviour affect asset returns. By analysing the unique stock trading dataset of the Korean market, we find that high investor sentiment induces higher stock market returns. We also find that institutional (individual) trades are positively (negatively) associated with stock returns, suggesting the information superiority (inferiority) of institutional (individual) investors. Investor sentiment generally plays a more important role in explaining stock market returns than investor trading behaviour.

Option moneyness and price disagreements

ABSTRACT This article investigates price disagreements between actual and options-implied futures prices by considering option moneyness. Out-of-the-money (OTM) options trading induces price disagreements more frequently than at-the-money (ATM) options trading. Examining price adjustments to eliminate disagreements, we find that the futures (options) market tends to move less (more) for OTM option disagreements than ATM option disagreements, suggesting that the price dynamics of OTM options are less informative and noisier than that of ATM options.

Investor sentiment, asset returns and firm characteristics: Evidence from the Korean Stock Market

ABSTRACT This study investigates the effects of investor sentiment on asset returns with respect to firm characteristics. By analysing a unique stock trading dataset of the Korean Stock Market that contains rich information on investor types and sentiment, we confirm that high investor sentiment induces higher stock market returns. The positive association between investor sentiment and stock returns is highly significant after controlling for trading behaviours, other risk factors and firm characteristics. Interestingly, investor sentiment has stronger effects on small firm, low-priced, high book-to-market ratio, high excess return, and highly volatile stocks, and stocks heavily traded by individual investors. The diverse degree and intensity of the sentiment effect across stocks with different firm characteristics is possibly attributable to individual investor’s trading.

Market depth, domestic investors and price monotonicity violations

ABSTRACT We re-examine the monotonicity violations of option price dynamics considering the roles of market depth and domestic investors. Violations caused by option price movements in conflict with underlying price movements tend to occur less frequently as the market depth increases, especially in the case of out-of-the-money options. In contrast, violations caused by option prices that remain sticky despite underlying price changes occur more frequently as the market depth increases. Both of these relationships are amplified by domestic investors.

Investor Sentiment, Stock Returns, and Firm Characteristics: Evidence from a Leading Emerging Market

This study examines how investor sentiment affects asset returns in the Korean stock market, a representative leading emerging market, in different ways depending on firm characteristics. By analyzing the unique stock trading dataset containing rich information on investor types and sentiment, we construct the firm-level investor sentiment index and investor-type trading behavior index. We confirm that high investor sentiment induces higher stock market returns. The positive association between investor sentiment and stock returns is highly significant after controlling trading behavior and other risk and firm characteristics. Investor sentiment is shown to have stronger effects for small-firm, low-priced, high book-to-market ratio, high excess return, and highly volatile stocks, and stocks heavily traded by individual investors. The diverse degree and intensity of the sentiment effect across firm and stock characteristics are attributable to individual investors’ trading.

Information Asymmetry and Trading Behavior by Investor Types Around the Bond-Rating Change Announcements

This study examines the stock-market reactions to public announcements (corporate bond-rating changes), in association with stock prices and investor behavior on trading volumes and trading patterns in the Korean stock market, a representative leading emerging market. Abnormal returns, abnormal volumes, and net order imbalance are estimated, using the high-quality and unique transaction data of Korean firms whose bonds have been rated by Korea Investors Service, NICE Investors Service, and Korea Ratings between 2000 and 2015. Our empirical finding shows positive (negative) abnormal stock returns around upgrades (downgrades), although stock-price reactions to downgrades are statistically more significant than those to upgrades, consistent with findings from previous studies. Significant abnormal volumes and order imbalances are found around rating changes, and the extent to which each investor group (domestic individuals, domestic institutions, and foreign investors) reacts to rating changes varies, which provides evidence for information superiority of domestic institutional investors and foreign investors in the Korean stock market.

A Study on the Role of Korean Credit Rating Agencies

Through the event study methodology and the case study on the Company T and its subsidiaries, this study analyzes the effect of credit rating downgrade in the Korean stock market. Our empirical results cast some doubts on whether credit rating agencies made adequate credit rating adjustments on the ...