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How does investor sentiment affect stock market crises?Evidence from panel data

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  • Mohamed Zouaoui

    ()
    (University of Franche-Comté LEG (FARGO)-UMR 5118)

  • Geneviève Nouyrigat

    ()
    (University of Grenoble CERAG-UMR 5820)

  • Francisca Beer

    ()
    (California State University of San Bernardino)

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    Abstract

    We test the impact of investor sentiment on a panel of international stock markets. Specifically, we examine the influence of investor sentiment on the probability of stock market crises. We find that investor sentiment increases the probability of occurrence of stock market crises within a one-year horizon. The impact of investor sentiment on stock markets is more pronounced in countries that are culturally more prone to herd-like behavior and overreaction or in countries with low institutional involvement.

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    Bibliographic Info

    Paper provided by Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations in its series Working Papers CREGO with number 1110304.

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    Length: 29 pages
    Date of creation: Mar 2011
    Date of revision:
    Handle: RePEc:dij:wpfarg:1110304

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    Postal: Angèle Renaud, CREGO, 2 Bd Gabriel, BP 26611, 21066 Dijon Cedex, France
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    Keywords: investor sentiment; noise trader; stock market crises;

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