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The Roles of Investor Sentiment in Malaysian Stock Market

Author

Listed:
  • Jasman Tuyon

    (Faculty of Business and Management, Universiti Teknologi MARA, Sabah, Locked Bag 71, 88997 Kota Kinabalu, Sabah, Malaysia)

  • Zamri Ahmad

    (School of Management, Universiti Sains Malaysia, 11800 USM Pulau Pinang, Malaysia)

  • Hylmee Matahir

    (Faculty of Business and Management, Universiti Teknologi MARA, Sabah, Locked Bag 71, 88997 Kota Kinabalu, Sabah, Malaysia)

Abstract

The objective of this work is to offer an alternative theoretical perspective and modelling of local investor sentiment proxies in Malaysian stock market. In the theoretical part, two alternative theoretical perspectives in understanding sentiment are introduced, namely, the cognitive-affective theory of mind from neuroscience and the ABC model of the cognitive psychology. In modelling, we identify a combination of survey-based and market-based investor sentiment proxies, namely, the consumer sentiment index, the business condition index, and the stock futures index. The validity of the theory and model is then falsified with empirical analysis by examining the long- and short-run as well as stability relationships of the sentiment proxies on the aggregate stock market index returns using suitable econometric methods. The findings revealed that the proposed sentiment proxies are statistically significant in relations to the stock market returns in the long- and short-run with varying degree of persistency. However, the relations are not homogeneous across different size, industry groups, and market states which are in line with the existing behavioural finance views. In summary, this paper provides a new theoretical insights and empirical evidence on the roles of sentiment in Malaysian stock market that offers valuable academic, practical and policy implications. Classification-JEL:

Suggested Citation

  • Jasman Tuyon & Zamri Ahmad & Hylmee Matahir, 2016. "The Roles of Investor Sentiment in Malaysian Stock Market," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 12(Suppl. 1), pages 43-75.
    • Handle: RePEc:usm:journl:aamjaf012s1_43-75
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    References listed on IDEAS

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    Cited by:

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    3. Shangkari V. Anusakumar & Ruhani Ali, 2017. "Momentum and Investor Sentiment: Evidence from Asian Stock Markets," Capital Markets Review, Malaysian Finance Association, vol. 25(1), pages 26-42.
    4. Rapheedah Musneh & Mohd. Rahimie Abdul Karim & Caroline Geetha A/P Arokiadasan Baburaw, 2021. "Liquidity risk and stock returns: empirical evidence from industrial products and services sector in Bursa Malaysia," Future Business Journal, Springer, vol. 7(1), pages 1-10, December.
    5. Jiun, Ricky Chia Chee, 2019. "Stock Market Volatility during the General Election," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(3), pages 43-57.
    6. Tan, Siow-Hooi & Lai, Ming-Ming & Tey, Eng-Xin & Chong, Lee-Lee, 2020. "Testing the performance of technical analysis and sentiment-TAR trading rules in the Malaysian stock market," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    7. Zamri Ahmad & Haslindar Ibrahim & Jasman Tuyon, 2018. "Governance of Behavioural Biases in Asset Management Industry: Insights from Fund Managers in Malaysia," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 14(2), pages 65-102.
    8. Jasman Tuyon & Zamri Ahmad, 2018. "Behavioural Asset Pricing Determinants in a Factor and Style Investing Framework," Capital Markets Review, Malaysian Finance Association, vol. 26(2), pages 32-52.

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