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The Relationship Between Investor Sentiment and Industry and Service Sector Stock Indices: An Application on Borsa Istanbul

Author

Listed:
  • Serdar YAMAN
  • Atilla KOÇYİĞİT

Abstract

In this study, the relationships between investor sentiment and the stock market have been examined on a sectoral basis. BIST Industrials Index (XUSIN) and BIST Services Index (XUHIZ), which are the stock indices of the industrial sector and the service sector that are among the sectors that represent a significant size of the Turkish economy, are included in the scope of the study. The Consumer Confidence Index (CCI) and Business Confidence Index (BCI) are used to represent investor sentiment. In the study, monthly price data for the period of January 2010-June 2022 were used. The relationships between BIST sector indices and investor sentiment indicators were investigated using cointegration analysis, causality analysis, impulse-response analysis and variance decomposition analysis. As a result of the cointegration analysis, it has been determined that both sector indices have a long-term cointegration relationship with BCI and CCI. As a result of the causality tests, a unidirectional causality relationship from XUSIN to BCI was detected, while a bidirectional causality relationship was detected between XUHIZ and BCI. However, no causal relationship was found between XUSIN, XUHIZ and CCI. Findings supporting the results of causality tests were obtained as a result of impulse-response analysis and variance decomposition analysis. In conclusion, it has been determined that the reaction of the investors' expectations to the changes in the sector indices is higher than the reaction of the changes in the prices of the sector indices to the changes in the investor expectations. This finding shows that the developments in the stock indices of the sectors that have a significant size in the country's economy are important in shaping investor confidence and expectations. As a result, it has been found that the changes in the stocks of companies operating in the industrial and services sectors have a significant impact on investor expectations and that the investors are affected by price changes in the sectors while shaping investment strategies and making investment decisions.

Suggested Citation

  • Serdar YAMAN & Atilla KOÇYİĞİT, 2023. "The Relationship Between Investor Sentiment and Industry and Service Sector Stock Indices: An Application on Borsa Istanbul," Fiscaoeconomia, Tubitak Ulakbim JournalPark (Dergipark), issue 3.
    • Handle: RePEc:fis:journl:230332
    DOI: 10.25295/fsecon.1300130
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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