A paper that examines how foreign and local sentiments play roles in affecting asset prices across markets has won this year's Richard A. Crowell prize.
Azi Ben-Rephael, Xi Dong, Massimo Massa and Changyun Zhou won the prize for their paper "Foreign Sentiment."
The prize, sponsored by PanAgora Asset Management, recognizes research that connects theory with application in the field of quantitative investment management.
The paper constructs a direct measure of both U.S. and non-U.S. investor sentiment using flow shifts toward international mutual funds to better understand whether those sentiments affect asset prices.
Mr. Ben-Rephael, associate professor in the finance and economics department at Rutgers Business School, said in a telephone interview that literature regarding global sentiment regarding asset prices has been "out there for a while."
"Global sentiment is important, but it might not be the full picture," he said.
He noted among the more interesting findings from the research for the paper was how investors from the U.S. react to U.S. news stories vs. non-U.S. investors, and vice versa.
"Foreign investors seem to react more strongly to news coming from local markets relative to local investors," he said.
While the prevailing belief is that U.S. sentiment is the most predictive sentiment when it comes to asset prices, non-U.S. sentiment plays a significant role as well.
"What we find in terms of sentiment is it seems to be a little more symmetric, which means U.S. markets are not immune to foreign sentiment from non-U.S. markets," Mr. Ben-Rephael said.
Eric Sorensen, PanAgora's president and CEO, said in a news release announcing the award: "This year's winning research contributes meaningfully to the understanding of investor sentiment and behavior across markets topics, which are of paramount importance in an ever evolving and globally connected world. We would like to thank all of those who have submitted and participated in this year's award and congratulate the winners."
Mr. Dong is assistant professor of finance, Baruch College, City University of New York, where Mr. Zhou is a doctoral candidate in finance. Mr. Massa is professor of finance and professor of banking at INSEAD, Singapore.
The prize, which has been awarded annually since 2001, is named for Richard A. Crowell, PanAgora's founder and a pioneer in the field of quantitative investing.
