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Some evidence from a principal component approach to measure a new investor sentiment index in the Tunisian stock market

Published on Dec 16, 2019in Managerial Finance
路 DOI :10.1108/MF-11-2018-0570
Abstract
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  • Citations (0)
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References39
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This paper studies the impact of investor sentiment on a portfolio formed of sin stocks鈥攑ublicly traded companies in the alcohol, tobacco, and gaming industries. Using a variety of sentiments-augmented asset pricing models, this research examines whether investor sentiment is a risk factor for sin stock returns. It also studies if the abnormal returns 鈥 found in the literature 鈥 for sin stocks persist after controlling for investor sentiment. Furthermore, we utilize a generalized autoregressive ...
15 CitationsSource
I analyze whether or not market-wide investor sentiment induces stock mispricing, by affecting the boldness of predictions of firms鈥 long-term earnings growth. I predict that bullish market-wide sentiment induces investors to aggressively separate firms with high growth futures from others, and that this excessive boldness results in a high level of mispricing. Consistent with my prediction, I observe an excessively large dispersion in consensus growth forecasts when proxies for investor sentime...
7 CitationsSource
#1Akshara Jyoti Kavya (IITs: Indian Institutes of Technology)H-Index: 5
#2Jitendra Mahakud (IITs: Indian Institutes of Technology)H-Index: 7
The present study probes the influence of investor sentiment on the predictability of Indian stock market volatility exploiting the non-linear conditional mean鈥搗ariance framework. We developed a broad based irrational aggregate sentiment index for an emerging market India to examine this issue. We employed ten aggregate market related sentiment proxies to construct sentiment index applicable for emerging stock markets. We used GARCH model and introduced sentiment in the mean framework. To captur...
14 CitationsSource
#1Zhong-Xin Ni (SHU: Shanghai University)H-Index: 1
#2Da-Zhong Wang (SHU: Shanghai University)H-Index: 1
Last. Wenjun Xue (College of Business Administration)H-Index: 2
view all 3 authors...
This paper employs the panel quantile regression model to study the nonlinear effect of investor sentiment on monthly stock returns in the Chinese A-share stock market. The findings show that the influence of investor sentiment is significant from 1month to 24months. Its effect is asymmetric and reversal, that is, it is positive and large for stocks with high returns in the short term while negative and small in the long term. This reversal effect verifies the existence of a strong overreaction ...
31 CitationsSource
#1Vikash Ramiah (UniSA: University of South Australia)H-Index: 10
#2Xiaoming Xu (BTBU: Beijing Technology and Business University)H-Index: 1
Last. Imad A. Moosa (RMIT: RMIT University)H-Index: 28
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While mainstream neoclassical finance ignores the role played by noise traders, a significant amount of empirical evidence is available to show that noise traders are active market participants and that their participation gives rise to market anomalies. Unlike neoclassical finance, behavioral finance allows for market inefficiency on the grounds that market participants are subject to common human errors that arise from heuristics and biases. In this paper we review the literature on the behavi...
14 CitationsSource
#1Yawen Hudson (IBS: International Business School, Germany)H-Index: 1
#2Christopher J. Green (Lboro: Loughborough University)H-Index: 18
This paper contributes to a growing body of literature studying investor sentiment. Separate sentiment measures for UK investors and UK institutional investors are constructed from commonly cited sentiment indicators using the first principle component method. We then examine if the sentiment measures can help predict UK equity returns, distinguishing between 鈥渢urbulent鈥 and 鈥渢ranquil鈥 periods in the financial markets. We find that sentiment tends to be a more important determinant of returns in...
8 CitationsSource
#1Dashan Huang (Singapore Management University)H-Index: 10
#2Fuwei Jiang (CUFE: Central University of Finance and Economics)H-Index: 8
Last. Guofu Zhou (WashU: Washington University in St. Louis)H-Index: 32
view all 4 authors...
We propose a new investor sentiment index that is aligned with the purpose of predicting the aggregate stock market. By eliminating a common noise component in sentiment proxies, the new index has much greater predictive power than existing sentiment indices have both in and out of sample, and the predictability becomes both statistically and economically significant. In addition, it outperforms well-recognized macroeconomic variables and can also predict cross-sectional stock returns sorted by ...
148 CitationsSource
#1Francisca Beer (CSU: California State University)H-Index: 4
#2Mohamed ZouaouiH-Index: 4
Recently, investor sentiment measures have become one of the more widely examined areas in behavioral finance. A number of measures have been developed in the literature without having been fully validated, and therefore leaving in question which measure should be used for empirical exploration. The purpose of this study is to examine the relative performance of a number of popular measures in predicting stock returns and to test the relative efficacy of a hybrid approach. Using a panel of inves...
9 CitationsSource
#1Malcolm P. Baker (Harvard University)H-Index: 31
#2Jeffrey Wurgler (NYU: New York University)H-Index: 27
Last. Yu Yuan (UPenn: University of Pennsylvania)H-Index: 8
view all 3 authors...
We construct investor sentiment indices for six major stock markets and decompose them into one global and six local indices. In a validation test, we find that relative sentiment is correlated with the relative prices of dual-listed companies. Global sentiment is a contrarian predictor of country-level returns. Both global and local sentiment are contrarian predictors of the time-series of cross-sectional returns within markets: When sentiment is high, future returns are low on relatively diffi...
362 CitationsSource
#1Philipp FinterH-Index: 1
#2Alexandra Niessen-Ruenzi (UMA: University of Mannheim)H-Index: 9
Last. Stefan Ruenzi (UMA: University of Mannheim)H-Index: 16
view all 3 authors...
This paper develops a broad-based sentiment indicator for Germany and investigates whether investor sentiment can explain stock returns on the German stock market. Based on a principal component analysis, we construct a sentiment indicator that condenses information of several well-known sentiment proxies. We show that this indicator explains the return spread between sentiment sensitive stocks and stocks that are not sensitive to sentiment fluctuations. Specifically, stocks that are difficult t...
24 CitationsSource
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