Behavioral Factors Dominate Stock Prices, Upending Traditional Finance
The article presents evidence supporting the idea that market behavior is influenced by people's emotions in addition to basic financial factors. Researchers found that the way investors feel affects the shape of the Expected Return curve. They demonstrate through various studies that this curve shows a back-and-forth pattern caused by emotions, confirming that it's influenced by sentiment. The research shows that emotions play a role in pricing options and that stocks' volatility is linked to how people feel about them. The evidence suggests that investors' sentiments impact the stock market more than just the numbers do.