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The Linkage between Sentiments and Stock Market Dynamics New Evidence from Iran

Author

Listed:
  • Heshmatollah Asgari
  • Hamed Najafi

Abstract

In recent years, the issue of financial behaviour and the impact of investors’ sentiments on their decision making have become such a popular issue. The sentiments of financial activists affect the market price of financial assets and particularly stocks, and therefore it is included in the new pricing models of capital assets. In this article, we seek the effect of investors’ sentiments on the dynamics of the Iranian stock market (TSE). To do this, among the companies accepted in the stock market we select 120, considering the research criteria and screening method, we examined TSE specifics throughout 2010-2018 using regression analysis and causality test. Our results show that firstly investors’ sentiments have a direct effect on the stock returns and there is a bilateral relationship between them. Secondly, inflation has the opposite effect and economic growth has a direct and positive effect on the relationship between investor sentiment and stock returns. Finally, government spending has no significant effect on the relationship between investor sentiment and stock returns.

Suggested Citation

  • Heshmatollah Asgari & Hamed Najafi, 2020. "The Linkage between Sentiments and Stock Market Dynamics New Evidence from Iran," Journal of Business Administration Research, Journal of Business Administration Research, Sciedu Press, vol. 9(2), pages 1-29, October.
    • Handle: RePEc:jfr:jbar11:v:9:y:2020:i:2:p:29
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    References listed on IDEAS

    as
    1. Zhifang He & Linjie He & Fenghua Wen, 2019. "Risk Compensation and Market Returns: The Role of Investor Sentiment in the Stock Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(3), pages 704-718, February.
    2. Ebenezer Asem & Jessica Chung & Xin Cui & Gloria Y Tian, 2016. "Liquidity, investor sentiment and price discount of SEOs in Australia," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 12(1), pages 25-51, February.
    3. Chung, San-Lin & Hung, Chi-Hsiou & Yeh, Chung-Ying, 2012. "When does investor sentiment predict stock returns?," Journal of Empirical Finance, Elsevier, vol. 19(2), pages 217-240.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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