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Investor Sentiment on the Stock Market using Artificial Neural Networks

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  • Oana Mădălina POPESCU

    (The Bucharest University of Economic Studies)

Abstract

The present study uses volatility as a measure of investor sentiment on the Romanian capital market. The GARCH(1,1) model and the GARCH(1,1) model with Student-t innovations are used in order to describe the volatility of the Bucharest Exchange Trading index. The estimated volatility series are afterwards included into two artificial neural networks with the purpose to evaluate the forecasting performance of these networks. The results show that even though the artificial neural networks are well specified the volatility of the BET index, as measured by the GARCH(1,1) and GARCH-t(1,1) models, does not represent a proper measure for investor sentiment on the market.

Suggested Citation

  • Oana Mădălina POPESCU, 2019. "Investor Sentiment on the Stock Market using Artificial Neural Networks," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 20(5), pages 508-518, December.
    • Handle: RePEc:rom:rmcimn:v:20:y:2019:i:5:p:508-518
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    References listed on IDEAS

    as
    1. Malcolm Baker & Jeffrey Wurgler, 2007. "Investor Sentiment in the Stock Market," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 129-152, Spring.
    2. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
    3. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    4. Brown, Gregory W. & Cliff, Michael T., 2004. "Investor sentiment and the near-term stock market," Journal of Empirical Finance, Elsevier, vol. 11(1), pages 1-27, January.
    5. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    investor sentiment; volatility; artificial neural network; GARCH(1; 1) model; GARCH-t(1; 1) model.;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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