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Investor Sentiment and Stock Returns: Evidence from Romania

Dragos Stefan Oprea and Laura Brad

International Journal of Academic Research in Accounting, Finance and Management Sciences, 2014, vol. 4, issue 2, 19-25

Abstract: The attitude of individual investors is strongly correlated with their sentiment, so their behavior on the stock market can generate important changes in price fluctuations. The aim of our study was to provide evidence regarding the relationship between the evolution of stock market and the individual investor sentiment, proxy by the consumer confidence index. This study is conducted on the Bucharest Stock Exchange (BSE) for a 10 year time period, starting from 2002 to 2011 and includes 120 observations. The results proved that there is a positive correlation between changes in consumer confidence and stock market returns, demonstrating that individual investor sentiment affects stock prices. However, the influence of individual investor sentiment seems to be quickly removed by the force of arbitrage. The price adjustments are realized in less than a month. Moreover, the influence of individual investor sentiment on the prices of the most 10 liquid companies from BSE is not statistically significant.

Keywords: Investor sentiment; noise; arbitrage; consumer confidence; Bucharest Stock Exchange (search for similar items in EconPapers)
Date: 2014
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