Investor sentiment and stock returns: Examining TAIEX performance with and without the impact of COVID-19

Hsiou-Ying Tseng () and Yi-Shu Li ()

Asian Journal of Empirical Research, 2025, vol. 15, issue 1, 33-39

Abstract: This study examines the impact of investor sentiment on Taiwan’s stock market (TAIEX) returns. We analyze two periods: 2007–2019 (pre-COVID-19) and 2007–2023 (including COVID-19), utilizing three sentiment proxies—margin financing and securities lending balance ratio, market turnover rate, and the number of active traders—along with a composite sentiment index to explore their contemporaneous, predictive, and lagging relationships with TAIEX returns. Empirical results reveal that the margin financing and securities lending balance ratio, as well as the composite sentiment index, exhibit a significant negative contemporaneous relationship with market returns. In contrast, market turnover and the number of active traders display a positive but statistically insignificant correlation during the COVID-19 period. Predictive analysis indicates that only the margin financing and securities lending balance ratio serves as a reliable predictor of future returns, with higher values associated with lower subsequent returns. Additionally, reverse causality tests show that market turnover and the number of active traders respond positively to past market returns. These findings underscore the critical role of sentiment in shaping market behavior, particularly during periods of market turbulence. They also offer valuable insights for investors and policymakers in refining trading strategies and enhancing risk management, especially during extreme events.

Keywords: COVID-19; Investor sentiment; Margin financing and securities lending balance ratio; Market turnover rate; Number of active traders. (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://archive.aessweb.com/index.php/5004/article/view/5373/8240 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:asi:ajoerj:v:15:y:2025:i:1:p:33-39:id:5373

Access Statistics for this article

More articles in Asian Journal of Empirical Research from Asian Economic and Social Society
Bibliographic data for series maintained by Robert Allen ().