The role of trust, investor sentiment, and uncertainty on bank stock return performance: Evidence from the MENA region

This paper aimed to understand the effect of investor sentiment, trust, and uncertainty on bank stock returns. Also, the research highlighted the effects of the interaction between uncertainty and trust. The sample covered 173 banks in the Middle East and North Africa region (MENA) and used data between 2010 and 2020. This study employed the Two-steps system Generalized Method of Moments estimator. The baseline findings of the MENA region revealed that market sentiment, uncertainty, and trust had positive effect on bank stock returns, while individual sentiment negatively influenced bank stock returns. Similarly, Gulf Cooperation Council Region's (GCC) shows almost same results as MENA region except individual sentiment was found positive and significant. The MENA and the GCC regions' interaction variables results found a negative effect on bank stock returns. While monarchy countries show asymmetry effects and found positive link between interaction of trust and uncertainty on the bank stock returns. Overall, the banking sectors of the MENA region were sensitive to investor sentiment, uncertainty, and trust. The limitation of this paper was the lack of weekly, monthly, or quarterly availability of data for all variables.