IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/71243.html
   My bibliography  Save this paper

Investor Sentiment and Stock Returns: Evidence from the Athens Stock Exchange

Author

Listed:
  • Gizelis, Demetrios
  • Chowdhury, Shah

Abstract

A plethora of academic research has been under way investigating the effect of individual investor sentiment on stock returns. It seems that the issue is not resolved yet because the empirical findings are not entirely conclusive. Most authors argue that there is a place for sentiment as a determining factor in the stock retu rn generating process while several others find that it is exactly the opposite. This paper aims at contributing to the existing debate by examining the relationship between investor sentiment and stock market returns of firms listed in the Athens Stock Exchange. We employ two investor sentiment prox ies, a direct and an indirect. As the direct me asurement of sentiment we use the historical investor sentiment indicators compiled by the European Commission, and for the indirect one we resort to the closed - end equity fund discount/premium. Using monthly data for the period January 199 5 to April 2014 the regression results indicate that investor sentiment weakly explains returns. B ecause this type of risk is not diversifiable, for practical purposes somehow it ought to be priced. Thus, it appears t hat behavio ral factors may be consider ed in empirical asset pricing models for the Greek market.

Suggested Citation

  • Gizelis, Demetrios & Chowdhury, Shah, 2016. "Investor Sentiment and Stock Returns: Evidence from the Athens Stock Exchange," MPRA Paper 71243, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:71243
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/71243/1/MPRA_paper_71243.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Antoniou, Constantinos & Doukas, John A. & Subrahmanyam, Avanidhar, 2013. "Cognitive Dissonance, Sentiment, and Momentum," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 48(1), pages 245-275, February.
    2. Shleifer, Andrei & Summers, Lawrence H, 1990. "The Noise Trader Approach to Finance," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 19-33, Spring.
    3. Lixu Chi & Xintian Zhuang & Dalei Song, 2012. "Investor sentiment in the Chinese stock market: an empirical analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 19(4), pages 345-348, March.
    4. Jason Bram & Sydney C. Ludvigson, 1998. "Does consumer confidence forecast household expenditure? a sentiment index horse race," Economic Policy Review, Federal Reserve Bank of New York, vol. 4(Jun), pages 59-78.
    5. Baker, Malcolm & Wurgler, Jeffrey & Yuan, Yu, 2012. "Global, local, and contagious investor sentiment," Journal of Financial Economics, Elsevier, vol. 104(2), pages 272-287.
    6. Sargent, Thomas J & Wallace, Neil, 1975. ""Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 241-254, April.
    7. John A. Doukas & Nikolaos T. Milonas, 2004. "Investor Sentiment and the Closed‐end Fund Puzzle: Out‐of‐sample Evidence," European Financial Management, European Financial Management Association, vol. 10(2), pages 235-266, June.
    8. Thomas A. Garrett & Ruben Hernandez-Murillo & Michael T. Owyang, 2005. "Does consumer sentiment predict regional consumption?," Review, Federal Reserve Bank of St. Louis, vol. 87(Mar), pages 123-135.
    9. 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.
    10. Shefrin, Hersh & Statman, Meir, 1994. "Behavioral Capital Asset Pricing Theory," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(3), pages 323-349, September.
    11. 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.
    12. Nikitas Niarchos & Christos Alexakis, 1998. "Stock market prices, 'causality' and efficiency: evidence from the Athens stock exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 8(2), pages 167-174.
    13. Brian Aitken, 1998. "Have Institutional Investors Destabilized Emerging Markets?," Contemporary Economic Policy, Western Economic Association International, vol. 16(2), pages 173-184, April.
    14. E. Dockery & M. G. Kavussanos, 1996. "Testing the efficient market hypothesis using panel data, with application to the Athens stock market," Applied Economics Letters, Taylor & Francis Journals, vol. 3(2), pages 121-123.
    15. Kling, Gerhard & Gao, Lei, 2008. "Chinese institutional investors' sentiment," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(4), pages 374-387, October.
    16. Leonard, David C. & Shull, David M., 1996. "Investor sentiment and the closed-end fund evidence: Impact of the January effect," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(1), pages 117-126.
    17. Acemoglu, Daron & Scott, Andrew, 1994. "Consumer Confidence and Rational Expectations: Are Agents' Beliefs Consistent with the Theory?," Economic Journal, Royal Economic Society, vol. 104(422), pages 1-19, January.
    18. Sydney C. Ludvigson, 2004. "Consumer Confidence and Consumer Spending," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 29-50, Spring.
    19. repec:bla:jfinan:v:43:y:1988:i:1:p:83-95 is not listed on IDEAS
    20. Christos Alexakis, 2011. "Financial Crisis, Ownership Effect and Investors Sentiment: Empirical Evidence from the Banking Sector in Greece," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 3-18.
    21. Michael Lemmon & Evgenia Portniaguina, 2006. "Consumer Confidence and Asset Prices: Some Empirical Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1499-1529.
    22. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    23. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    24. Theophano Patra & Sunil Poshakwale, 2006. "Economic variables and stock market returns: evidence from the Athens stock exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 16(13), pages 993-1005.
    25. Alok Kumar & Charles M.C. Lee, 2006. "Retail Investor Sentiment and Return Comovements," Journal of Finance, American Finance Association, vol. 61(5), pages 2451-2486, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. ALAJEKWU, Udoka Bernard & OBIALOR, Michael Chukwumee & OKORO, Cyprian Okey, 2017. "Ffect Of Investor Sentiment On Future Returns In The Nigerian Stock Market," Annals of Spiru Haret University, Economic Series, Universitatea Spiru Haret, vol. 17(2), pages 103-126.
    2. Ngoc Bao Vuong, Yoshihisa Suzuki, 2020. "Does Fear has Stronger Impact than Confidence on Stock Returns?The Case of Asia-Pacific Developed Markets," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 67, pages 157-175, July.
    3. Ngoc Bao Vuong & Yoshihisa Suzuki, 2022. "The Moderating Effect of Market-Specific Factors on the Return Predictability of Investor Sentiment," SAGE Open, , vol. 12(3), pages 21582440221, July.
    4. Ahmed Bouteska & Taimur Sharif & Mohammad Zoynul Abedin, 2024. "Does investor sentiment create value for asset pricing? An empirical investigation of the KOSPI‐listed firms," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 3487-3509, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Han, Xing & Li, Youwei, 2017. "Can investor sentiment be a momentum time-series predictor? Evidence from China," Journal of Empirical Finance, Elsevier, vol. 42(C), pages 212-239.
    2. Li, Yuan & Ran, Jimmy, 2020. "Investor Sentiment and Stock Price Premium Validation with Siamese Twins from China," Journal of Multinational Financial Management, Elsevier, vol. 57.
    3. Tiwari, Aviral Kumar & Abakah, Emmanuel Joel Aikins & Bonsu, Christiana Osei & Karikari, Nana Kwasi & Hammoudeh, Shawkat, 2022. "The effects of public sentiments and feelings on stock market behavior: Evidence from Australia," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 443-472.
    4. Kumari, Jyoti, 2019. "Investor sentiment and stock market liquidity: Evidence from an emerging economy," Journal of Behavioral and Experimental Finance, Elsevier, vol. 23(C), pages 166-180.
    5. Shen, Junyan & Yu, Jianfeng & Zhao, Shen, 2017. "Investor sentiment and economic forces," Journal of Monetary Economics, Elsevier, vol. 86(C), pages 1-21.
    6. Stambaugh, Robert F. & Yu, Jianfeng & Yuan, Yu, 2012. "The short of it: Investor sentiment and anomalies," Journal of Financial Economics, Elsevier, vol. 104(2), pages 288-302.
    7. Mariano González-Sánchez & M. Encina Morales de Vega, 2021. "Influence of Bloomberg’s Investor Sentiment Index: Evidence from European Union Financial Sector," Mathematics, MDPI, vol. 9(4), pages 1-21, February.
    8. Sayim, Mustafa & Rahman, Hamid, 2015. "An examination of U.S. institutional and individual investor sentiment effect on the Turkish stock market," Global Finance Journal, Elsevier, vol. 26(C), pages 1-17.
    9. Seok, Sang Ik & Cho, Hoon & Ryu, Doojin, 2019. "Firm-specific investor sentiment and daily stock returns," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    10. Hou, Yang & Meng, Jiayin, 2018. "The momentum effect in the Chinese market and its relationship with the simultaneous and the lagged investor sentiment," MPRA Paper 94838, University Library of Munich, Germany.
    11. Szymon Lis, 2022. "Investor Sentiment in Asset Pricing Models: A Review," Working Papers 2022-14, Faculty of Economic Sciences, University of Warsaw.
    12. Corredor, Pilar & Ferrer, Elena & Santamaria, Rafael, 2013. "Investor sentiment effect in stock markets: Stock characteristics or country-specific factors?," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 572-591.
    13. Guo, Haifeng & Hung, Chi-Hsiou D. & Kontonikas, Alexandros, 2022. "The Fed and the stock market: A tale of sentiment states," Journal of International Money and Finance, Elsevier, vol. 128(C).
    14. Wang, Wenzhao & Su, Chen & Duxbury, Darren, 2021. "Investor sentiment and stock returns: Global evidence," Journal of Empirical Finance, Elsevier, vol. 63(C), pages 365-391.
    15. Ung, Sze Nie & Gebka, Bartosz & Anderson, Robert D.J., 2023. "Is sentiment the solution to the risk–return puzzle? A (cautionary) note," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    16. Yuan Li, 2022. "Mood Beta, Sentiment and Stock Returns in China," SAGE Open, , vol. 12(1), pages 21582440221, February.
    17. Keunbae Ahn, 2021. "Predictable Fluctuations in the Cross-Section and Time-Series of Asset Prices," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2021, January-A.
    18. Berna Aydogan, 2017. "Sentiment dynamics and volatility of international stock markets," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 7(3), pages 407-419, December.
    19. del Río, Cristina & Ferrer, Elena & López-Arceiz, Francisco J., 2024. "Analyst optimism and market sentiment: Evidence from European corporate sustainability reporters," Research in International Business and Finance, Elsevier, vol. 69(C).
    20. Joey W. Yang & Lewis May & John Gould, 2023. "Exchange‐traded fund ownership and underlying stock mispricing," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1417-1445, April.

    More about this item

    Keywords

    Keywords: Investor sentiment; Greek stock market; Return predictability;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:71243. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.