Financial markets, financial decisions and risk, as well as the way in which stock prices and returns are estimated, are the most researched topics in financial literature. There are many economics and financial theories developed, discussed and modelled in the literature. An important part of these theories and models is assessing psychological factors, which affect investors and financial decisions. The study of Kahneman and Tversky (1979) showed that the psychology of investors affects stock prices. One of the first finance theories and models, also known as the traditional finance theory, states that the investors are rational and markets are efficient. On the other hand, the second one known as behavioral finance theory, states that markets are not efficient and investors are irrational, implying that psychological and emotional characteristics of investors effect investors' decisions. This study firstly deals with anomalies in financial markets, rumors, decision making under uncertainty, investor psychology, investor sentiment, herd psychology and consumer confidence. Then it examines the investor sensitivity and the effects of consumer confidence on financial markets. Finally it analyzes the effect of consumer confidence indices on financial markets. As a result from this research, stock prices are expected to be influenced by consumer expectations and investor sentiment.
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