Individual Mean-Variance Relation and Stock-Level Investor Sentiment

Kim, Jun Sik; Kim, Da‐Hea; Seo, Sung Won

doi:10.3846/16111699.2016.1252794

Cited by 10 publications

(4 citation statements)

References 36 publications

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“…Also, other irrational traders trade in concert in these high sentiment periods. This is consistent with the finding of a deterioration of the risk-return relationship in high sentiment periods due to the impact of less sophisticated noise traders (Antoniou et al, 2015;Kim, Kim, & Seo, 2017;Piccoli, Da Costa, Da Silva, & Cruz, 2018).…”

Section: Literature Reviewsupporting

confidence: 91%

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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Section: Literature Reviewsupporting

confidence: 91%

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

Rupande

Muguto

Muzindutsi

2019

Cogent Economics & Finance

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“…This possesses a thoughtful apprehension over the legitimacy of any finance theory which investigates with the statement of financial agents being rational. Kim et al (2017) represents that illogical investor sentiment has a methodical role in affecting stock returns in the market. This impression of investor sentiment has been used in emerging behavioural asset pricing models.…”

Section: Review Of Literaturementioning

confidence: 99%

Investor sentiment and stock return volatility: evidence from the Indian Stock Exchange

Sreenu

Naik²

2021

APJBA

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PurposeIn any stock market, volatility is a significant factor in strengthening their asset pricing. The upsurge in volatility in the stock market can activate and bring changes in the financial risk. According to financial conventional theory, the stakeholders (investors) are selected to be balanced and variations in pertinent risk are also to be anticipated due to the outcome of the drive-in basic factors in Indian stock markets. The hypothesis shows that there are actions in systematic and unsystematic risks that are determined by volatility. It is allied to sentiment-driven in the trader movement.Design/methodology/approachThe paper used the methodology of generalized autoregressive conditional heteroskedasticity-in mean GARCH-M and exponential GARCH-M (E-GARCH-M) methods on the Indian stock market. The data have been covered from 2000 to 2019.FindingsFinally, the study suggests that due to the unfitness of the capital asset pricing model (CAPM), the selection has enhanced with sentiment is an important risk factor.Practical implicationsThe investor sentiment and stock return volatility statement are established by using the investor sentiment amalgamated stock market index built.Originality/valueThe outcome of the study shows that there is an important association between stakeholder (investor) sentiment and stock return, in case of volatility behavioural finance can significantly explain the behaviour of stock returns on the Indian Stock Exchange.

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“…However, the ambiguous mean-variance relationship has been argued for decades (French et al, 1987;Campbell, 1987;Turner et al, 1989). Additionally, some literature argues the effect of behavioral biases of investors on the mean-variance relationship (Cohen et al, 2005;Yu and Yuan, 2011;Kim et al, 2017a;Seo et al, 2021) to explain this unclear relationship.…”

Section: Introductionmentioning

confidence: 99%

Mean–variance relationship and uncertainty

Kim

2021

JDQS

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This study investigates the impact of uncertainty on the mean-variance relationship. We find that the stock market's expected excess return is positively related to the market's conditional variances and implied variance during low uncertainty periods but unrelated or negatively related to conditional variances and implied variance during high uncertainty periods. Our empirical evidence is consistent with investors' attitudes toward uncertainty and risk, firms' fundamentals and leverage effects varying with uncertainty. Additionally, we discover that the negative relationship between returns and contemporaneous innovations of conditional variance and the positive relationship between returns and contemporaneous innovations of implied variance are significant during low uncertainty periods. Furthermore, our results are robust to changing the base assets to mimic the uncertainty factor and removing the effect of investor sentiment.

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Individual Mean-Variance Relation and Stock-Level Investor Sentiment

Cited by 10 publications

References 36 publications

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

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

Investor sentiment and stock return volatility: evidence from the Indian Stock Exchange

Mean–variance relationship and uncertainty

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