Original scientific paper

https://doi.org/doi.org/10.2478/bsrj-2024-0018

Sentiment and Stock Characteristics: Comprehensive Study of Individual Investor Influence on Returns, Volatility, and Trading Volumes

Aleš Kresta orcid.org/0000-0001-8621-3493 ; VSB – Technical University of Ostrava, Faculty of Economics, Czech Republic
Jialei Xiong ; VSB – Technical University of Ostrava, Faculty of Economics, Czech Republic
Bahate Maidiya orcid.org/0000-0002-6721-4113 ; VSB – Technical University of Ostrava, Faculty of Economics, Czech Republic

Abstract

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.

Keywords

investor sentiment; stock characteristics; behavioural finance; AAII sentiment index

Hrčak ID:

320834

URI

https://hrcak.srce.hr/320834

Publication date:

22.9.2024.

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