期刊名称：Forthcoming in Management Science
作者：Liya Chu (East China University of Science and Technology), Xuezhong He (University of Technology Sydney), 李凯（Macquarie Business School, Macquarie University；西南财经大学金融研究院）, Jun Tu (Singapore Management University - Lee Kong Chian School of Business)
This study investigates the impact of investor sentiment on excess equity return forecasting. A high (low) investor sentiment may weaken the connection between fundamental economic (behavioral-based non-fundamental) predictors and market returns. We find that although fundamental variables can be strong predictors when sentiment is low, they tend to lose their predictive power when investor sentiment is high. Non-fundamental predictors perform well during high-sentiment periods while their predictive ability deteriorates when investor sentiment is low. These paradigm shifts in equity return forecasting provide a key to understanding and resolving the lack of predictive power for both fundamental and non-fundamental variables debated in recent studies.