Investor Sentiment and Stock Return: Do Industries Matter?

Dash, Saumya Ranjan; Mahakud, Jitendra

doi:10.1177/0973801013491530

Cited by 13 publications

(10 citation statements)

References 63 publications

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“…They also suggested the development of a sentiment index based on these macroeconomic and market indicators. Using some of these indicators, Dash and Mahakud (2013) examined the explanatory power of an index of investor sentiment on aggregate returns. They found a significant relationship between the investor sentiment index and stock returns across industries in the Indian stock market.…”

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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“…regulated utilities, firm with long earning history, stable dividend). In addition, recent research provide evidence that firms in a different industry are reported to have different influential sentiment effect (Kaplanski and Levy, 2010;Chou, Ho and Ko, 2012;Chen, Chen and Lee, 2013;Dash and Mahakud, 2013) but behavioral explanation for this issue is not justified.…”

Section: Figure 1: Conceptual Framework For Association Relationshipsmentioning

confidence: 98%

Heterogeneity of Sentiment Risk in Malaysian Stock Market

Tuyon

Ahmad

Ghazali

2016

URAF

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Behavioral risks including investor sentiment plays an important roles in Asia’s stock market behaviors but theoretically and empirically not well understood in traditional conditional means statistic partly due to its heterogeneity roles. In contrast to the existing studies, this paper examine the heterogeneity roles of investor sentiment proxies (i.e. CSI, BCS, and FKLI) in influencing various aggregate stock market indices in Malaysia. The proposed sentiment proxies relation to stock returns are statistically analyzed using mean-based (OLS) and quantile based (QR) regression methods to uncover the relationships accross full range of stock market returns conditional distributions. In the analysis, we examine the possible multidimensional association of various conditional of sentiments (i.e. average, sentiment states, market states, and interaction between sentiment and market states) on size (i.e. big firms vs. small firms) and industry (i.e. defensive vs. speculative) segmented data. The OLS analysis does not provides conclusive significant association of sentiment to returns but the QR analysis reveal emerging patterns of sentiment heterogeneity roles. Specifically, the QR analysis reveal an asymmetric association between sentiment to returns with U-curve pattern from negative magnitude in the lower quantiles and positive magnitude in the upper quantiles. The findings not only consistent with the current hypothesis that sentiment risk is strongly affected the small firms and speculative industry but also the big firms. The sentiment-return associations are statistically significant in extreme lower quantiles and in extreme upper quantiles of return distributions. These patterns are consistent with theoretical postulates of prospect theory and evidence of assymetric overreaction of Asia investors to sentiment news. Overall, the findings from this paper provides new insights for theoretical understanding and practical application of sentiment risk in stock market.

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“…In this regard, sentiment could also influence big size firms (Akhtar et al, 2012). As for industry type, recent research provides evidences that firms in different industries are reported to have different sentiment effect (Kaplanski & Levy, 2010;Chou et al 2012;Chen et al, 2013;Dash & Mahakud, 2013). The behavioural explanation to this issue is discussed in data description and segmentation section.…”

Section: Modelling Investor Sentimentmentioning

confidence: 99%