Can investor sentiment predict the size premium?

This study uses theoretical arguments from the psychology and financial decision-making literature to assess the extent to which investor sentiment contributes to explaining the size premium. We use daily, weekly and monthly data for 1965-2017, and several investor sentiment measures often used in the recent literature, including stock market-based, survey-based and press-based proxies. We provide empirical evidence that small stock premiums correlate with and are predictable through the use of a set of lagged investor sentiment measures. Our findings hold true for different sample periods and various modeling specifications.