Market Sentiment and Investor Overreaction: Evidence from New York Listed Asian Country Exchange Traded Funds

Jason Zhe Ma, Kung-Cheng Ho, Lu Yang and Chien-Chi Chu

Emerging Markets Finance and Trade, 2018, vol. 54, issue 11, 2455-2471

Abstract: This article investigates Asian Country Exchange-Traded Fund (ETF) price deviation with underlying due to market sentiment. By implementing a dynamic contrarian trading strategy and a buy-and-hold strategy, this article finds that significant abnormal excess trading profit can be generated by capitalizing on the overnight price reversion. The excess return generated by the dynamic strategy over buy-and-hold separates the influence of market sentiment to ETF price deviation from fundamental movements. By studying the relations between variations of the excess returns and market sentiment, the article finds that the ETF price deviation is highly influenced by market sentiment and the effect exacerbates during financial crisis and distress.

Date: 2018
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DOI: 10.1080/1540496X.2018.1464907

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