Research on the sentiment asset pricing with information

We present a generalized sentiment asset pricing model under asymmetric information, which shows that the investor sentiment has a systematic and significant impact on the asset price. In the model, sentiment is contrasted with information. The insiders possess valuable information and trade in such a way that the fundamental information is incorporated into prices, the sentiment investors trade on their own sentiments so that the investor sentiment is also factored into prices, and the outsiders occasionally chase sentiment as if it were information, thereby amplifying sentiment shocks and moving the asset price away from fundamental values. Moreover, the proportion of sentiment investors, the information quality and so on could amplify the sentiment shock on the asset price, thus reducing the efficiency of the market. © 2016, Editorial Board of Journal of Systems Engineering Society of China. All right reserved.