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

Mohamed Zouaoui (), Geneviève Nouyrigat () and Francisca Beer ()
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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

Working Papers CREGO from Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations

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.

Keywords: investor sentiment; noise trader; stock market crises (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2011-03
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Citations: View citations in EconPapers (76)

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