Abstract 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.