Financial Crisis, Ownership Effect and Investors Sentiment: Empirical Evidence from the Banking Sector in Greece

According to financial theory, in an efficient market investors reflect fully and instantaneously all relevant information on security prices in a way consistent with the economic theory. Empirical research on market efficiency investigates if there is past available information which can help to predict future returns profitably, as well as if factors not related to rational economic behaviour, influence stock prices. Financial manias and panics are examples which serve as obvious evidence against the efficient market theory. This study investigates the stock price behaviour of a number of listed banks prior and during the financial crisis of 2008-2009. Banks under investigation were separated into two categories i.e. large banks and small banks. These two categories behaved differently under the crisis. We have serious reasons to believe that the different behaviour was not due to different performance or risk exposure but due to different ownership structure. Big banks, with high institutional participation indicated stock price dynamics during the crisis, possibly because of the fact that institutional investors were affected by correlated negative sentiment or mimicking minimising loss strategies irrespectively of the quality of the banks’ assets. Thus, the ownership structure of an asset may be of importance to its stock price behaviour contrary to the prediction of the efficient market theory.