Does investor's sentiment affect industries' return? – A case of selected Indian industries
Purpose – In a first of its kind, this paper tries to explore the long-run relationship between investors' sentiment and selected industries' returns over the period January 2010 to December 2021. Design/methodology/approach – The paper uses 23 market and macroeconomic proxies to measure i...
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| Format: | Article |
| Language: | English |
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Emerald Publishing
2023-11-01
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| Series: | Business Analyst |
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| Online Access: | https://www.emerald.com/insight/content/doi/10.1108/BAJ-10-2022-0031/full/pdf |
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| author | Amit Rohilla Neeta Tripathi Varun Bhandari |
| author_facet | Amit Rohilla Neeta Tripathi Varun Bhandari |
| author_sort | Amit Rohilla |
| collection | DOAJ |
| description | Purpose – In a first of its kind, this paper tries to explore the long-run relationship between investors' sentiment and selected industries' returns over the period January 2010 to December 2021. Design/methodology/approach – The paper uses 23 market and macroeconomic proxies to measure investor sentiment. Principal component analysis has been used to create sentiment sub-indices that represent investor sentiment. The autoregressive distributed lag (ARDL) model and other sophisticated econometric techniques such as the unit root test, the cumulative sum (CUSUM) stability test, regression, etc. have been used to achieve the objectives of the study. Findings – The authors find that there is a significant relationship between sentiment sub-indices and industries' returns over the period of study. Market and economic variables, market ratios, advance-decline ratio, high-low index, price-to-book value ratio and liquidity in the economy are some of the significant sub-indices explaining industries' returns. Research limitations/implications – The study has relevant implications for retail investors, policy-makers and other decision-makers in the Indian stock market. Results are helpful for the investor in improving their decision-making and identifying those sentiment sub-indices and the variables therein that are relevant in explaining the return of a particular industry. Originality/value – The study contributes to the existing literature by exploring the relationship between sentiment and industries' returns in the Indian stock market and by identifying relevant sentiment sub-indices. Also, the study supports the investors' irrationality, which arises due to a plethora of behavioral biases as enshrined in classical finance. |
| format | Article |
| id | doaj-art-c3273b67365e41e788a02614a03c1914 |
| institution | Kabale University |
| issn | 0973-211X 2754-6721 |
| language | English |
| publishDate | 2023-11-01 |
| publisher | Emerald Publishing |
| record_format | Article |
| series | Business Analyst |
| spelling | doaj-art-c3273b67365e41e788a02614a03c19142025-02-03T14:29:23ZengEmerald PublishingBusiness Analyst0973-211X2754-67212023-11-0144210612710.1108/BAJ-10-2022-0031Does investor's sentiment affect industries' return? – A case of selected Indian industriesAmit Rohilla0Neeta Tripathi1Varun Bhandari2Department of Commerce, Gargi College, University of Delhi, New Delhi, IndiaDepartment of Commerce, Dyal Singh College, University of Delhi, New Delhi, IndiaDepartment of Business Economics, Gargi College, University of Delhi, New Delhi, IndiaPurpose – In a first of its kind, this paper tries to explore the long-run relationship between investors' sentiment and selected industries' returns over the period January 2010 to December 2021. Design/methodology/approach – The paper uses 23 market and macroeconomic proxies to measure investor sentiment. Principal component analysis has been used to create sentiment sub-indices that represent investor sentiment. The autoregressive distributed lag (ARDL) model and other sophisticated econometric techniques such as the unit root test, the cumulative sum (CUSUM) stability test, regression, etc. have been used to achieve the objectives of the study. Findings – The authors find that there is a significant relationship between sentiment sub-indices and industries' returns over the period of study. Market and economic variables, market ratios, advance-decline ratio, high-low index, price-to-book value ratio and liquidity in the economy are some of the significant sub-indices explaining industries' returns. Research limitations/implications – The study has relevant implications for retail investors, policy-makers and other decision-makers in the Indian stock market. Results are helpful for the investor in improving their decision-making and identifying those sentiment sub-indices and the variables therein that are relevant in explaining the return of a particular industry. Originality/value – The study contributes to the existing literature by exploring the relationship between sentiment and industries' returns in the Indian stock market and by identifying relevant sentiment sub-indices. Also, the study supports the investors' irrationality, which arises due to a plethora of behavioral biases as enshrined in classical finance.https://www.emerald.com/insight/content/doi/10.1108/BAJ-10-2022-0031/full/pdfAutoregressive distributed lag modelBehavioral financeCUSUMHeteroscedasticityIndustry returnInvestor sentiment |
| spellingShingle | Amit Rohilla Neeta Tripathi Varun Bhandari Does investor's sentiment affect industries' return? – A case of selected Indian industries Business Analyst Autoregressive distributed lag model Behavioral finance CUSUM Heteroscedasticity Industry return Investor sentiment |
| title | Does investor's sentiment affect industries' return? – A case of selected Indian industries |
| title_full | Does investor's sentiment affect industries' return? – A case of selected Indian industries |
| title_fullStr | Does investor's sentiment affect industries' return? – A case of selected Indian industries |
| title_full_unstemmed | Does investor's sentiment affect industries' return? – A case of selected Indian industries |
| title_short | Does investor's sentiment affect industries' return? – A case of selected Indian industries |
| title_sort | does investor s sentiment affect industries return a case of selected indian industries |
| topic | Autoregressive distributed lag model Behavioral finance CUSUM Heteroscedasticity Industry return Investor sentiment |
| url | https://www.emerald.com/insight/content/doi/10.1108/BAJ-10-2022-0031/full/pdf |
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