Advanced Search
MyIDEAS: Login to save this paper or follow this series

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

Contents:

Author Info

  • M. Zouaoui

    (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS : UMR5820 - Université Pierre Mendès-France - Grenoble II)

  • G. Nouyrigat

    (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS : UMR5820 - Université Pierre Mendès-France - Grenoble II)

  • F. Beer

    (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS : UMR5820 - Université Pierre Mendès-France - Grenoble II)

Registered author(s):

    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. Results also suggest that investors' sentiment is not a reliable predictor of stock market reversal points

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://halshs.archives-ouvertes.fr/docs/00/53/47/54/PDF/cr_2010_08_E2.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by HAL in its series Post-Print with number halshs-00534754.

    as in new window
    Length:
    Date of creation: 2010
    Date of revision:
    Handle: RePEc:hal:journl:halshs-00534754

    Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00534754/en/
    Contact details of provider:
    Web page: http://hal.archives-ouvertes.fr/

    Related research

    Keywords: Investor sentiment ; stock market crises ; reversal points;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Eugene White & Frederic Mishkin, 2002. "U.S.Stock Market Crashes and Their Aftermath: Implications for Monetary Policy," Departmental Working Papers, Rutgers University, Department of Economics 200208, Rutgers University, Department of Economics.
    2. Michael Lemmon & Evgenia Portniaguina, 2006. "Consumer Confidence and Asset Prices: Some Empirical Evidence," Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1499-1529.
    3. Kaminsky, Graciela & Lizondo, Saul & Reinhart, Carmen M., 1997. "Leading indicators of currency crises," Policy Research Working Paper Series 1852, The World Bank.
    4. Bussiere, Matthieu & Fratzscher, Marcel, 2006. "Towards a new early warning system of financial crises," Journal of International Money and Finance, Elsevier, Elsevier, vol. 25(6), pages 953-973, October.
    5. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
    6. J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, . "Noise Trader Risk in Financial Markets," J. Bradford De Long's Working Papers _124, University of California at Berkeley, Economics Department.
    7. John Y. Campbell & Robert J. Shiller, 2001. "Valuation Ratios and the Long-Run Stock Market Outlook: An Update," NBER Working Papers 8221, National Bureau of Economic Research, Inc.
    8. Virginie Coudert & Mathieu Gex, 2007. "Does Risk Aversion Drive Financial Crises? Testing the Predictive Power of Empirical Indicators," Working Papers 2007-02, CEPII research center.
    9. Fischer Black, 1988. "An Equilibrium Model of the Crash," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 269-276 National Bureau of Economic Research, Inc.
    10. Siegel, Jeremy J, 1992. "Equity Risk Premia, Corporate Profit Forecasts, and Investor Sentiment around the Stock Crash of October 1987," The Journal of Business, University of Chicago Press, vol. 65(4), pages 557-70, October.
    11. Catherine A. Pattillo & Andrew Berg, 1998. "Are Currency Crises Predictable? a Test," IMF Working Papers 98/154, International Monetary Fund.
    12. Schmeling, Maik, 2008. "Investor sentiment and stock returns: Some international evidence," Hannover Economic Papers (HEP) dp-407, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    13. Shefrin, Hersh & Statman, Meir, 1985. " The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence," Journal of Finance, American Finance Association, American Finance Association, vol. 40(3), pages 777-90, July.
    14. Andrew Ang & Geert Bekaert, 2001. "Stock Return Predictability: Is it There?," NBER Working Papers 8207, National Bureau of Economic Research, Inc.
    15. Malcolm Baker & Jeffrey Wurgler, 2006. "Investor Sentiment and the Cross-Section of Stock Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 61(4), pages 1645-1680, 08.
    16. Lily Qiu & Ivo Welch, 2004. "Investor Sentiment Measures," NBER Working Papers 10794, National Bureau of Economic Research, Inc.
    17. Amit Goyal & Pedro Santa-Clara, 2003. "Idiosyncratic Risk Matters!," Journal of Finance, American Finance Association, American Finance Association, vol. 58(3), pages 975-1008, 06.
    18. Malcolm Baker & Jeffrey Wurgler, 2007. "Investor Sentiment in the Stock Market," NBER Working Papers 13189, National Bureau of Economic Research, Inc.
    19. Ho, Chienwei & Hung, Chi-Hsiou, 2009. "Investor sentiment as conditioning information in asset pricing," Journal of Banking & Finance, Elsevier, vol. 33(5), pages 892-903, May.
    20. Niederhoffer, Victor, 1971. "The Analysis of World Events and Stock Prices," The Journal of Business, University of Chicago Press, vol. 44(2), pages 193-219, April.
    21. Malcolm Baker & Jeffrey Wurgler & Yu Yuan, 2009. "Global, local, and contagious investor sentiment," Globalization and Monetary Policy Institute Working Paper 37, Federal Reserve Bank of Dallas.
    22. Marvin Goodfriend, 2001. "Financial stability, deflation, and monetary policy," Working Paper, Federal Reserve Bank of Richmond 01-01, Federal Reserve Bank of Richmond.
    23. Gregory W. Brown & Michael T. Cliff, 2005. "Investor Sentiment and Asset Valuation," The Journal of Business, University of Chicago Press, vol. 78(2), pages 405-440, March.
    24. Alok Kumar & Charles M.C. Lee, 2006. "Retail Investor Sentiment and Return Comovements," Journal of Finance, American Finance Association, American Finance Association, vol. 61(5), pages 2451-2486, October.
    25. Brown, Gregory W. & Cliff, Michael T., 2004. "Investor sentiment and the near-term stock market," Journal of Empirical Finance, Elsevier, Elsevier, vol. 11(1), pages 1-27, January.
    26. Fama, Eugene F. & Schwert, G. William, 1977. "Asset returns and inflation," Journal of Financial Economics, Elsevier, Elsevier, vol. 5(2), pages 115-146, November.
    27. Kenneth L. Fisher & Meir Statman, 2006. "Market Timing In Regressions And Reality," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 29(3), pages 293-304.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:hal:journl:halshs-00534754. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.