Exploring relation between Indian market sentiments and stock market returns

Aggarwal, Divya

doi:10.18488/journal.1007/2017.7.7/1007.7.147.159

Cited by 9 publications

(9 citation statements)

References 17 publications

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“…This is an indication that investors are not always rational in Nigeria, and their irrational investment decision significantly influences stock trading in the country. This result agrees with studies that found significant positive relationship between investors' sentiment and stock performance among emerging and developing countries (Dalika &Yudhvir, 2015;Asian Naik & Padhi, 2016;Alajekwu, Obialor, Okoro & Ibenta, 2017;Aggarwal, 2017;Pandey & Sehgal, 2019;Cheng, 2019). On the other hand, the finding from this study disagrees with studies that found no significant relationship between investors' sentiment and stock trading (Zainudin, Zaki, Hadi, Hussain & Kantakji, 2019).…”

Section: Conclusion and Recommendationssupporting

confidence: 71%

“…The birth of behavioural finance (otherwise behavioural economics) in the 1990s has been on the rise in empirical literature that has sought to determine whether stock trading is driven by investors' sentiments. There is a consensus in the literature that sentiment influences market performance among emerging markets (Dalika &Yudhvir, 2015;Naik &Padhi, 2016;Aggarwal, 2017;Pandey & Sehgal, 2019;Cheng, 2019). These studies corroborate findings from Alajekwu, Obialor, Okoro and Ibenta (2017) which found that sentiment significantly influences market performance in Nigeria.…”

Section: 0supporting

confidence: 67%

“…Empirical literature also shows that investor sentiment plays an important role in market performance determination. Studies across Africa (Bennet, Amoako, Charles, Edward &Darkwah, 2012;Dalika&Yudhvir, 2015;Alajekwu, Obialor, Okoro &Ibenta, 2017), and in Asia (Naik&Padhi, 2016;Aggarwal, 2017;Pandey & Sehgal, 2019;Cheng, 2019) confirmed that investor sentiment significantly influences market performance. However, few studies in China (Huang, Yang, Yang & Sheng, 2014).…”

Section: Empirical Literaturementioning

confidence: 92%

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Investors’ sentiment and stock trading in the Nigerian capital market

Njogo¹,

Oladele²,

Mabinuori³

2020

CIJDS

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This study examined the relationship between investors sentiment and stock trading for thirty listed firms in Nigeria, covering periods of 2015-2019. This study comes at a time when behavioral economics gains larger interest in investment decision. This school of thought dismisses the assertion of neoclassical economics that markets are efficient;, hence they cannot be beaten by consistently earning abnormal profits. Two research objectives were formulated for the study, which borders on determining whether investors’ sentiment affects stock trading of corporate firms in Nigeria, and whether investors’ sentiment affect trading stocks for industries in Nigeria differently. Data for the study were sourced from banking, manufacturing, and insurance sectors of the Nigerian Stock Exchange. Fixed effect regression was used to analyse the effect of investors’ sentiment on stock trading. The Analysis of Covariance was used to examine whether investors’ sentiment differently affect trading stocks for different sector in Nigeria. The results obtained showed that investors’ sentiment exerts significant impact on stock trading of the firms investigated, and it is used to affect trading stocks for industries in Nigeria differently. The study recommends that investors should make use of fundamental analysis and technical analysis to trade stocks. Keywords: Behavioural economics, efficient market hypothesis, Investors’ sentiment, neoclassical economics, and stock trading.

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Section: Conclusion and Recommendationssupporting

confidence: 71%

Section: 0supporting

confidence: 67%

Section: Empirical Literaturementioning

confidence: 92%

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Investors’ sentiment and stock trading in the Nigerian capital market

Njogo¹,

Oladele²,

Mabinuori³

2020

CIJDS

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“…Pandey and Sehgal (2019) constructed the composite sentiment index for India and found that small firm effects are captured by the sentiment based factor. Aggarwal (2017) used MMI and volatility index to capture the sentiment in India. The study showed that MMI is positively related to stock returns and VIX is negatively related to stock returns.…”

Section: Literature Reviewmentioning

confidence: 99%

Asymmetric relationship of investor sentiment with stock return and volatility: evidence from India

Chakraborty

Subramaniam

2020

RBF

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PurposeThe study examines the cross-sectional and asymmetric relationship of investor sentiment with the stock returns and volatility in India.Design/methodology/approachThe investor sentiment is captured using a market-based measure Market Mood Index (MMI) and a survey-based measure Consumer Sentiment Index (CSI). The asymmetric effect of the relationship is examined using quantile causality approach and cross-sectional effect is examined by considering indices such as the BSE Sensex, and the various size indices such as BSE Large cap, BSE Mid cap and BSE Small cap.FindingsThe result of the study found that investor sentiment (MMI) cause stock returns at extreme quantiles. Lower sentiment induces fear-induced selling, thereby lowers the returns and high sentiment is followed by lower future returns as market reverts to fundamentals. On the other hand, bullish shifts in sentiment lower the volatility. There exists a positive feedback effect of stock return and volatility in the formation of investor sentiment.Originality/valueThe study captures both asymmetric and cross-sectional relationship of investor sentiment and stock market in an emerging economy, India. The study uses a novel data set (i.e.) MMI which captures the sentiment based on market indicators and are widely disseminated to the public.

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“…in the Indian stock market challenging the early works on financial asset price formation process, which states that noise traders are not important. And the existence of causal relationship between market return and sentiment and volatility and sentiment have been studied by Aggarwal (2017), Naik and Padhi (2016) and Kumari and Mahakud (2015, 2016) at the Indian financial market. All these factors motivate the present study, that is, to examine whether the performance of options trading can be improved if volatility forecasting incorporating investors’ sentiment was incorporated in the decision-making process at the Indian options market.…”

Section: Introductionmentioning

confidence: 99%

Volatility Forecast Incorporating Investors’ Sentiment and its Application in Options Trading Strategies: A Behavioural Finance Approach at Nifty 50 Index

Mutum

2020

Vision: The Journal of Business Perspective

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The present study was to examine whether the performance of options trading strategies can be improved if volatility forecasting incorporating investors’ sentiment was incorporated in the decision-making process at the Indian options market. The study adopted the multiple-factor model to build the Indian volatility forecasting model. The benchmark forecasting model (BMF) includes absolute daily returns (|RA|), daily high–low range (HLR) and daily realized volatility (RV). The proxies of investors’ sentiment considered in the study were India volatility index (IVIX), advance decline ratio (ADR), put-call open interest (PCOI) and their changes. The results of the causality and regression test indicate that investors’ sentiment and their changes should be included in the forecasting model. Mean absolute percentage error (MAPE) indicates that 15-day holding period shows the minimum error. Straddle strategies were simulated 15 days ahead before the options maturity date base on the direction of the forecast for different volatility forecasting models. The simulation result shows that the options trading performance might be improved if volatility forecasting incorporating investor sentiment, particularly IVIX, was incorporated in the decision-making process at the Indian options market. From the behavioural finance point of view, the study bridges the gap between options trading, volatility forecasting and information content of investors’ sentiment at the Indian financial market.

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Exploring relation between Indian market sentiments and stock market returns

Cited by 9 publications

References 17 publications

Investors’ sentiment and stock trading in the Nigerian capital market

Investors’ sentiment and stock trading in the Nigerian capital market

Asymmetric relationship of investor sentiment with stock return and volatility: evidence from India

Volatility Forecast Incorporating Investors’ Sentiment and its Application in Options Trading Strategies: A Behavioural Finance Approach at Nifty 50 Index

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