FFECT OF INVESTOR SENTIMENT ON FUTURE RETURNS IN THE NIGERIAN STOCK MARKET

Udoka Bernard Alajekwu (), Michael Chukwumee Obialor () and Cyprian Okey Okoro ()
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Udoka Bernard Alajekwu: Nnamdi Azikiwe University, Postal: Anambra State, Nigeria
Michael Chukwumee Obialor: Chukwuemeka Odumegwu Ojukwu University, Postal: Igbariam Campus, Anambra State, Nigeria
Cyprian Okey Okoro: Chukwuemeka Odumegwu Ojukwu University, Postal: Igbariam Campus, Anambra State, Nigeria

Annals of Spiru Haret University, Economic Series, 2017, vol. 17, issue 2, 103-126

Abstract: Nigerian stock market for a period covering the time from the first quarter of 2008 to fourth quarter of 2015. The OLS regression and granger causality techniques were employed for data analyses. The results showed that (1) investor sentiment has a significant positive effect on stock market returns even after control for fundamentals such as Industrial production index, consumer price index and Treasury bill rate; (2) there is a uni-directional causality that runs from change in investor sentiment (ΔCCI) to stock market returns (Rm). Derived finding showed that the inclusion of fundamentals increased the explanatory power of investor sentiment from 3.96% to 33.05%, though at both level, investor sentiment (ΔCCI) has low explanatory power on stock market returns. The study posits existence of a dynamic relationship between investor sentiment and the behaviour of stock future returns in Nigeria such that higher sentiment concurrently leads to higher stock prices.

Keywords: investor sentiment; Nigerian stock market; stock returns; consumer confidence index; noise trading (search for similar items in EconPapers)
JEL-codes: G11 M12 (search for similar items in EconPapers)
Date: 2017
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