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

  • M. Zouaoui

    (CERAG - Centre d'études et de recherches appliquées à la gestion - Grenoble 2 UPMF - Université Pierre Mendès France - CNRS)

  • G. Nouyrigat

    (CERAG - Centre d'études et de recherches appliquées à la gestion - Grenoble 2 UPMF - Université Pierre Mendès France - CNRS)

  • F. Beer

    (CERAG - Centre d'études et de recherches appliquées à la gestion - Grenoble 2 UPMF - Université Pierre Mendès France - CNRS)

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    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

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

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    Date of creation: 2010
    Date of revision:
    Publication status: Published in Cahier de recherche n° 2010-08 E2. 2010
    Handle: RePEc:hal:journl:halshs-00534754
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