Rational–Irrational Investor Sentiments and Emerging Stock Market Returns: A Comparison from Turkey

Sidika Gulfem Bayram

Journal of Emerging Market Finance, 2017, vol. 16, issue 3, 219-245

Abstract: This study investigates the dynamic relationship between rational and irrational consumer-business sentiments and stock returns in an emerging stock market, Turkey. Consumer and business sentiments are divided into two components: rational and irrational sentiments. Then, the dynamic interactions and the impact of the sentiments on stock returns are examined. The fundamental economic variables used in the study consist of business conditions, economic risk premium, country risk, exchange rate risk, country growth rate, inflation rate, and terms of trade. The results show that Istanbul Stock Exchange (ISE)-100 index returns are positively and significantly affected by the rational sentiments of both consumers and businesses. JEL Classification: G02, G12, G150

Keywords: Investor sentiment; investor rationality; stock returns; emerging markets; Turkey (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:16:y:2017:i:3:p:219-245

DOI: 10.1177/0972652717722083

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