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Individual Investors’ Sentiment and Temporary Stock Price Pressure

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  • Siu Y. Chan
  • Wai‐Ming Fong

Abstract

Using data for the Hong Kong stock market, where individual investors’ sentiment is likely to be influential, this study finds that the publication of individual investors’ sentiment temporarily affects stock prices regardless of the publication's incompetence in predicting stock returns. Specifically, when the publication reports that more and more investors are optimistic, the return on the day just after the publication is higher and the return several days later is lower. Furthermore, the results are strongest for small stocks, and weakest for large stocks. It seems that some individual investors buy (sell) stocks when others, as reported by the publication, are optimistic (pessimistic), and that the trading causes temporary buying (selling) pressure initially and price reversals afterwards.

Suggested Citation

  • Siu Y. Chan & Wai‐Ming Fong, 2004. "Individual Investors’ Sentiment and Temporary Stock Price Pressure," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(5‐6), pages 823-836, June.
    • Handle: RePEc:bla:jbfnac:v:31:y:2004:i:5-6:p:823-836
    DOI: 10.1111/j.0306-686X.2004.00558.x
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    References listed on IDEAS

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    Cited by:

    1. Gric, Zuzana & Bajzík, Josef & Badura, Ondřej, 2023. "Does sentiment affect stock returns? A meta-analysis across survey-based measures," International Review of Financial Analysis, Elsevier, vol. 89(C).
    2. Daniel Perez-Liston & Daniel Huerta-Sanchez & Juan Gutierrez, 2018. "Do Domestic Sentiment and the Spillover of US Investor Sentiment Impact Mexican Stock Market Returns?," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(2_suppl), pages 185-212, August.
    3. Taufiq Choudhry & Gishan Dissanaike & Ranadeva Jayasekera & Woo-Young Kang & Matthias Nnadi, 2021. "Loss sensitive investors and positively biased analysts in Hong Kong stock market," Review of Quantitative Finance and Accounting, Springer, vol. 57(4), pages 1345-1371, November.
    4. Utku Uygur & Oktay Taş, 2014. "The impacts of investor sentiment on returns and conditional volatility of international stock markets," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(3), pages 1165-1179, May.

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