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Market Sentiment and Investor Overreaction: Evidence from New York Listed Asian Country Exchange Traded Funds

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  • Jason Zhe Ma
  • Kung-Cheng Ho
  • Lu Yang
  • Chien-Chi Chu

Abstract

This article investigates Asian Country Exchange-Traded Fund (ETF) price deviation with underlying due to market sentiment. By implementing a dynamic contrarian trading strategy and a buy-and-hold strategy, this article finds that significant abnormal excess trading profit can be generated by capitalizing on the overnight price reversion. The excess return generated by the dynamic strategy over buy-and-hold separates the influence of market sentiment to ETF price deviation from fundamental movements. By studying the relations between variations of the excess returns and market sentiment, the article finds that the ETF price deviation is highly influenced by market sentiment and the effect exacerbates during financial crisis and distress.

Suggested Citation

  • Jason Zhe Ma & Kung-Cheng Ho & Lu Yang & Chien-Chi Chu, 2018. "Market Sentiment and Investor Overreaction: Evidence from New York Listed Asian Country Exchange Traded Funds," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(11), pages 2455-2471, September.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:11:p:2455-2471
    DOI: 10.1080/1540496X.2018.1464907
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    Cited by:

    1. Yue’e Long & Wunhong Su & Yufan Tan, 2023. "Does a Share Name Change Have an Impact on the Pricing Efficiency of the Share?," SAGE Open, , vol. 13(4), pages 21582440231, December.
    2. John Murugesu & Chandra Sakaran, 2019. "The Interaction of Market Risk and Idiosyncratic Risk on Equity Mutual Fund Returns," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(6), pages 1-14, October.
    3. Peng, Kang-Lin & Wu, Chih-Hung & Lin, Pearl M.C. & Kou, IokTeng Esther, 2023. "Investor sentiment in the tourism stock market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    4. Narayan, Paresh Kumar & Narayan, Seema, 2021. "Do opinion polls on government preference influence stock returns?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    5. Ho, Kung-Cheng & Yang, Lu & Luo, Sijia, 2022. "Information disclosure ratings and continuing overreaction: Evidence from the Chinese capital market," Journal of Business Research, Elsevier, vol. 140(C), pages 638-656.

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