Tuyon, Jasman and Ahmad, Zamri and Matahir, Hylmee
(2016)
The Roles Of Investor Sentiment In Malaysian
Stock Market.
Asian Academy of Management Journal of Accounting and Finance, 12 (1).
pp. 1-33.
ISSN 1823-4992
Abstract
The objective of this work is to offer an alternative theoretical perspective and modelling
of local investor sentiment proxies in Malaysian stock market. In the theoretical part, two
alternative theoretical perspectives in understanding sentiment are introduced, namely,
the cognitive-affective theory of mind from neuroscience and the ABC model of the
cognitive psychology. In modelling, we identify a combination of survey-based and
market-based investor sentiment proxies, namely, the consumer sentiment index, the
business condition index, and the stock futures index. The validity of the theory and model
is then falsified with empirical analysis by examining the long- and short-run as well as
stability relationships of the sentiment proxies on the aggregate stock market index
returns using suitable econometric methods. The findings revealed that the proposed
sentiment proxies are statistically significant in relations to the stock market returns in
the long- and short-run with varying degree of persistency. However, the relations are
not homogeneous across different size, industry groups, and market states which are in
line with the existing behavioural finance views. In summary, this paper provides a new
theoretical insights and empirical evidence on the roles of sentiment in Malaysian stock
market that offers valuable academic, practical and policy implications.
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