Theses and Dissertations - UTB/UTPA

Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)



First Advisor

Dr. Haiwei Chen

Second Advisor

Dr. Chintal A. Desai

Third Advisor

Dr. Jan M. Smolarski


This dissertation investigates the effects of investor sentiment on asset prices in both the U.S. equity market (chapter III) and international market (chapter IV). It employs a conditional version of the CAPM using a parsimonious generalized autoregressive conditional heteroskedasticity (GARCH) model in which the risk premia, betas, and correlations are time-varying. Investor sentiment is presented from two direct measures (surveys) and one indirect measure as conditional information variables; whereas, previous studies used macroeconomic fundamentals. Furthermore, investor sentiment is not assumed to be fully irrational. It is decomposed into its rational and irrational components. Both rational and irrational components are tested as conditioning information variables in several models. Results are compared with the macroeconomic fundamentals model. Chapter III provides evidence U.S. investor sentiment contains information is priced in the U.S. equity market. In chapter IV, we find no evidence U.S. investor sentiment, either total or irrational, is related to the world market price of risk. These findings are important because it provides evidence U.S. investor sentiment does not significantly affect international asset pricing. This implies there are generally no transmission effects of U.S. sentiment across international markets.


Copyright 2012 David William Johnk. All Rights Reserved.

Granting Institution

University of Texas-Pan American