Sentiment and Stock Characteristics: Comprehensive Study of Individual Investor Influence on Returns, Volatility, and Trading Volumes
Publié en ligne: 10 oct. 2024
Pages: 67 - 82
Reçu: 23 janv. 2024
Accepté: 26 juil. 2024
DOI: https://doi.org/10.2478/bsrj-2024-0018
Mots clés
© 2024 Aleš Kresta et al., published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 International License.
Background
Traditional asset pricing models face challenges from financial anomalies, prompting exploration through behavioural finance theory. This study analyses the nuanced relationship between individual investor sentiment and key stock market variables.
Objectives
To assess the impact of individual investor sentiment on stock returns, volatilities, and trading volumes using the American Association of Individual Investors (AAII) sentiment index.
Methods/Approach
Using regression models, we examine the relationship between individual investor sentiment and various stock characteristics across 480 components of the Standard & Poor's 500 index.
Results
We find a positive relationship between the AAII sentiment index and stock returns and a negative relationship with volatility and trading volume.
Conclusions
Our study contributes to understanding the intricate role of individual investor sentiment in financial markets.