Investor sentiment and foreign financial flows: Evidence from South Africa

Muguto, Hilary Tinotenda; Rupande, Lorraine; Muzindutsi, Paul-François

doi:10.18045/zbefri.2019.2.473

Cited by 3 publications

(3 citation statements)

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“…Conversely, proxy factors are variables that, through the use of basic market data, indirectly reflect the sentiment of investors at the moment (Pandey & Sehgal, 2019). Many studies have demonstrated that proxies are significantly more useful in assessing sentiment in the financial markets (Baker & Wurgler, 2006;Muguto et al, 2019Muguto et al, & 2022. The attraction of this strategy is rooted in how simple it is to gather proxies and how real-time proxy observation can reveal the degree of bullishness or bearishness among market participants (Murut et al, 2019(Murut et al, & 2022.…”

Section: Methodsmentioning

confidence: 99%

Assessing the Influence of Investor Sentiment on the Performance of the Stock prices: Analyzing Stock Returns and Volatility During the COVID-19 Pandemic and Periods of Market Fluctuations.

Hassan

2024

MSA-Management Sciences Journal

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The primary objective of this study is to examine how investor sentiment affects stock market performance, with a particular focus on two indicators: stock returns and stock market volatility. The analysis takes into account the impact of the coronavirus pandemic and takes into account two market conditions: upside (bullish) and downside (bearish). Monthly closing prices for ten sector indices were analysed, including information technology, healthcare, financials, consumer credit, telecommunications services, industrials, energy, utilities, real estate, and materials. The study used three GARCH models (GARCH, GJR-GARCH, and E-GARCH) to predict the volatility of these sector indices and understand the impact of investor sentiment. The results indicate a negative impact of investor sentiment on stock returns and stock market volatility in most sectors. The coronavirus pandemic is having a positive impact on the relationship between investor sentiment, volatility, and stock returns.In addition, the results reveal a bidirectional link between investor sentiment and stock volatility across all US sectors. Regarding the market situation, it has been shown that in emerging markets, investor sentiment has a negative impact on volatility, and stock returns in the majority of sectors. However, in bear markets, the effect of investor sentiment on stock market returns and volatility is positive.

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Section: Methodsmentioning

confidence: 99%

Assessing the Influence of Investor Sentiment on the Performance of the Stock prices: Analyzing Stock Returns and Volatility During the COVID-19 Pandemic and Periods of Market Fluctuations.

Hassan

2024

MSA-Management Sciences Journal

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“…For investor sentiment, two indices -a daily index of Rupande et al (2019) and a monthly index of Muguto et al (2019) are employed, both updated to fit the study period herein this study. These indices were generated from a set of selected proxies, with the principal component analysis (PCA) technique employed as the method of construction.…”

Section: Measurement Of Investor Sentimentmentioning

confidence: 99%

“…Such ubiquitous effects of sentiment are not surprising, given that market-wide investor sentiment influences the movement of funds through purchases and liquidation of financial market securities (Muguto et al, 2019). However, there is evidence to suggest that, while investor sentiment effects reach virtually all subsections of financial markets, the same effects vary according to the prevailing market regimes (Goh et al, 2018;Xu et al, 2019).…”

Section: Introductionmentioning

confidence: 99%

The Impact of Investor Sentiment on Housing Prices and the Property Stock Index Volatility in South Africa

Muzindutsi

Apau

Muguto

et al. 2023

Real Estate Management and Valuation

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While prior studies have examined the predictive effect of macroeconomic and country risk components on property stock index dynamics, limited explanations exist in the literature regarding the time-varying effect of investor sentiment on housing prices. Accordingly, this study assesses the impact of investor sentiment on housing properties’ returns and the effect of investor sentiment on the conditional volatility of housing price indices under different market conditions, using GARCH, GJR-GARCH, E-GARCH and Markov-switching VAR models. We found investor sentiment to significantly impact the risk premium of the property returns, where property returns increased with positive changes in investor sentiment, and conditional volatility of property returns decreased with the same changes in investor sentiment. Investor sentiment exerts positive predictive influences on the prices of small and medium houses, in both bullish and bearish market conditions but does not affect the large housing market segment. This makes the implementation of risk-related diversification across small and medium real estate portfolios more effective than large real estate portfolios. Our findings show that investor sentiment is a plausible driver of mass investor redemption actions under conditions of uncertainty.

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Testing of portfolio optimization through investments in stock market indices and Bitcoin

Grujić¹,

Mekinjić²,

Vujičić-Stefanović³

2021

Ekonomika preduzeća

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This paper presents an empirical verification of the effectiveness and usefulness of investment diversification using the main stock exchange indices and Bitcoin. The objective is to determine the effects applying the Markowitz portfolio optimization theory, i.e., the advantages of applying the modern portfolio theory for institutional investors. The research offers an answer to the following question: what are the advantages and disadvantages of using Bitcoin in portfolio optimization? The paper contributes to the representation of the reach and limitations of the modern portfolio theory for institutional investors. The conclusion is that rational behaviour of institutional investors requires consideration of portfolio optimization using the Markowitz model, because it is possible to create portfolios which, on the basis of historical returns, provide desired returns alongside certain risks. The methodology includes the analysis of high frequency data, i.e., daily trading data were used. The results indicate that the use of the Markowitz portfolio selection method, with all its limitations, is desirable, possible and applicable, but that it entails serious flaws in the sense of neglecting transaction costs, foreign exchange differences and the real value in the stock market. The results of the research show that Bitcoin is a good source of diversification in a portfolio that contains traditional financial instruments both for the risk-averse investor as well as for those investors who have a greater appetite for risk. The conclusion is that rational behavior of institutional investors requires consideration of investing in Bitcoin using the Markowitz model. However, given the high degree of volatility, investors should be very careful when making decisions about including Bitcoin in the portfolio.

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Investor sentiment and foreign financial flows: Evidence from South Africa

Cited by 3 publications

References 0 publications

Assessing the Influence of Investor Sentiment on the Performance of the Stock prices: Analyzing Stock Returns and Volatility During the COVID-19 Pandemic and Periods of Market Fluctuations.

Assessing the Influence of Investor Sentiment on the Performance of the Stock prices: Analyzing Stock Returns and Volatility During the COVID-19 Pandemic and Periods of Market Fluctuations.

The Impact of Investor Sentiment on Housing Prices and the Property Stock Index Volatility in South Africa

Testing of portfolio optimization through investments in stock market indices and Bitcoin

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