Investor Sentiment and Stock Market Volatility: Evidence from India

Kumari, Jyoti; Mahakud, Jitendra

doi:10.1080/10599231.2016.1166024

Cited by 36 publications

(23 citation statements)

References 79 publications

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“…Rahman and Shamsuddin (2019) studied the excess price ratio and its influence on investor sentiment and found that the price to earnings ratio increased with a rise in investors' sentiment. Kumari and Mahakud (2016) and Chandra and Thenmozhi (2013) studied the impact of investor sentiment in the Indian capital market. They found a positive relationship between investor sentiment and market volatility.…”

Section: Literature Reviewmentioning

confidence: 99%

An empirical examination of investor sentiment and stock market volatility: evidence from India

Haritha

Rishad

2020

Financ Innov

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Understanding the irrational sentiments of the market participants is necessary for making good investment decisions. Despite the recent academic effort to examine the role of investors’ sentiments in market dynamics, there is a lack of consensus in delineating the structural aspect of market sentiments. This research is an attempt to address this gap. The study explores the role of irrational investors’ sentiments in determining stock market volatility. By employing monthly data on market-related implicit indices, we constructed an irrational sentiment index using principal component analysis. This sentiment index was modelled in the GARCH and Granger causality framework to analyse its contribution to volatility. The results showed that irrational sentiment significantly causes excess market volatility. Moreover, the study indicates that the asymmetrical aspects of an inefficient market contribute to excess volatility and returns. The findings are crucial for retail investors as well as portfolio managers seeking to make an optimum portfolio to maximise profits.

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Section: Literature Reviewmentioning

confidence: 99%

An empirical examination of investor sentiment and stock market volatility: evidence from India

Haritha

Rishad

2020

Financ Innov

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“…This was a period characterised by very high sentiment due to the positive outlook on financial markets. Naik and Padhi (2016) and Kumari and Mahakud (2016) found that sentiment influences the conditional volatility on the Indian market. The latter study also found that the relationship between stock return volatility and sentiment was persistent, suggesting that investor sentiment in India does play a significant role in determining the stock market volatility.…”

Section: Literature Reviewmentioning

confidence: 99%

Investor sentiment and stock return volatility: Evidence from the Johannesburg Stock Exchange

Rupande

Muguto

Muzindutsi

2019

Cogent Economics & Finance

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Volatility is an important component of asset pricing; an increase in volatility on markets can trigger changes in the risk distribution of financial assets. In conventional financial theory, investors are considered to be rational and any changes in relevant risk are assumed to be a result of the movement in fundamental factors. However, herein this study, it is hypothesized that there are movements in risk that are driven by volatility linked to sentiment-driven noise trader activity whose patterns are irreconcilable with changes in fundamental factors. This assertion is tested using a daily sentiment composite index constructed from a set of proxies and Generalised Autoregressive Conditional Heteroscedasticity models on the South African market over a period spanning July 2002 to June 2018. The results show that there is a significant connection between investor sentiment and stock return volatility which shows that behavioural finance can significantly explain the behaviour of stock returns on the Johannesburg Stock Exchange. It is, thus, recommended that due to the inadequacies of popular asset pricing models such as the Capital Asset Pricing Model, consideration should be made towards augmenting these asset pricing models with a sentiment risk factor.

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“…The aggregate sentiments involve herding behaviour, which refers to an attitude that tend to believe more on others' information rather than that on one's own information (De long et al, 1990) and going against the herd by informed arbitrageurs is costly and risky as well (Shleifer & Vishny, 1997). Again, Kumari and Mahakud (2016) have found a unidirectional causality from sentiment to the stock market volatility. Tuyon, Ahmad, and Matahir (2016) also have revealed that investor sentiment has significant effects on the short run and long run stock market returns in the Malaysian stock market and the effects are heterogeneous across firm sizes, industry groups and market states etc.…”

Section: Literature Reviewmentioning

confidence: 99%

Market Microstructure Noise, Intraday Stock Market Returns, and Adaptive Learning: Indian Evidence

Sinha

2019

Colombo Bus. J

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What drives intraday traders' sentiments in the stock markets: information or noise? This paper argues that the market microstructure noise (MMN) manifests intraday traders' aggregate sentiments depicted by chaotic and noisy market returns. It examines if intraday stock market returns, returns' variances and higher order moments are erratic, noisy and nonnormal. It shows that the intraday Bombay Stock Exchange (BSE) Sensex and National Stock Exchange (NSE) Nifty index returns approximate to zero-mean, zero-variance but skewed and leptokurtic in distributions. In exploring the intraday market index returns, standardisation process reveals noises in the BSE market, but it is evened up in the NSE market. Since intraday traders' market sentiments and decision choices are behavioural, noisy but adaptive, their decision choices need strategies given that those strategies have numerical "attractions" that determine choice probabilities. We explore the adaptive Experience Weighted Attraction (EWA) learning parameters to show persistent MMN in intraday traders' adaptive learning behaviours.

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Investor Sentiment and Stock Market Volatility: Evidence from India

Cited by 36 publications

References 79 publications

An empirical examination of investor sentiment and stock market volatility: evidence from India

An empirical examination of investor sentiment and stock market volatility: evidence from India

Investor sentiment and stock return volatility: Evidence from the Johannesburg Stock Exchange

Market Microstructure Noise, Intraday Stock Market Returns, and Adaptive Learning: Indian Evidence

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