ScienceDirect Publication: Journal of Empirical Finance
Fri, 27 Dec 2019 18:00:44 GMT language
Publication date: Available online 26 December 2019
Source: Journal of Empirical Finance
Author(s): Jia Bi, Yifeng Zhu
In this paper, we find that the relationship between the value-at-risk (VaR) and expected returns is negative and this negative relationship between the VaR and expected returns can be explained by volatility in the U.S. market. However, for different levels of investor sentiment, this relationship changes. For a high sentiment period, VaR is negatively related with the expected return and cannot be explained by momentum, short-term reversal, volatility, and financial distress. In comparison, the relation between the VaR and expected returns during a low sentiment period is mixed.