Persistence of investor sentiment and market mispricing

We investigate changes in US market sentiment using structural break analysis over a period of five decades. show that investor was trending and nonstationary from 1965 to 2001, associated with numerous crashes. Since has been substantially more mean reverting, implying the diminished effect noise investors their mispricing. illustrate how these persistence affect equity anomalies assess predictive power on short-run returns when regime are considered. Our findings suggest presence sentiment-driven impact is significantly time-variant.