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An examination of U.S. institutional and individual investor sentiment effect on the Turkish stock market

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  • Sayim, Mustafa
  • Rahman, Hamid

Abstract

This study examines the effect of rational and irrational components of U.S. institutional and individual investor sentiment on Istanbul Stock Market (ISE) return and volatility. The results show that there is a significant spillover effect of U.S. investor sentiment on stock return and volatility of ISE. A breakdown of sentiment by the type of investor shows that the impact of institutional sentiment is greater than that of individual sentiment. A breakdown of sentiment by rationality shows that the effect of rational sentiment on ISE return is faster though not necessarily greater than that of irrational sentiment. The conclusion from these results is that the effect of U.S. investor sentiment is systemic and cannot be diversified away. U.S. investor sentiment, therefore, constitutes a priced risk factor and must be accounted for accordingly in international asset pricing models. The findings also provide some evidence of a negative relationship between U.S. investor sentiment and ISE return volatility.

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  • Sayim, Mustafa & Rahman, Hamid, 2015. "An examination of U.S. institutional and individual investor sentiment effect on the Turkish stock market," Global Finance Journal, Elsevier, vol. 26(C), pages 1-17.
    • Handle: RePEc:eee:glofin:v:26:y:2015:i:c:p:1-17
    DOI: 10.1016/j.gfj.2015.01.001
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    More about this item

    Keywords

    Investor sentiment; ISE; VAR model;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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