Applicability of behavioural finance

It is believed that investor sentiment is correlated to stock market returns, making consistent positive (or negative) return on stocks investing possible and as such, disreputing the Efficient Market Hypothesis (EMH). Various literatures have put forth the notion that investor sentiment, investing...

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Main Authors: Chong, Chee Wah, Low, Ji Teng, Paik, Jek Yin
Other Authors: School of Humanities and Social Sciences
Format: Final Year Project
Language:English
Published: 2013
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Online Access:http://hdl.handle.net/10356/51884
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Institution: Nanyang Technological University
Language: English
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spelling sg-ntu-dr.10356-518842019-12-10T13:42:24Z Applicability of behavioural finance Chong, Chee Wah Low, Ji Teng Paik, Jek Yin School of Humanities and Social Sciences Nguyen Duc Quang DRNTU::Social sciences::Economic theory::Money and banking It is believed that investor sentiment is correlated to stock market returns, making consistent positive (or negative) return on stocks investing possible and as such, disreputing the Efficient Market Hypothesis (EMH). Various literatures have put forth the notion that investor sentiment, investing behaviors, or degree of fear (henceforth shall all be known as ‘market sentiment’) is correlated to stock market returns. These researches are done either through mathematical proving and/or through careful analysis of financial surveys. This paper attempts to answer the question: what are some of the most effective ways of measuring the investor sentiments? And are these measures of investor sentiment valid when used to explain market anomalies through the use of Capital Asset Pricing Model (CAPM)? In order to identify the most statistically significant gauges of investors’ behaviors, a few prominent methodologies and its resulting economic indices have been analysed. Specifically, they were the (i) Volatility Index (VIX), (ii) Consumer Sentiment Index (CSI), (iii) Bull-Bear Spread Index (BBS) and the (iv) Investor Sentiment Index (ISI). Relationship between abnormal return represented by the market alpha and the investor sentiment represented by various confidence variables has been constructed. At the end of the paper, the results will show that CSI is the only measure of investor sentiments that can be incorporated into CAPM in explaining the stock alpha. Bachelor of Arts 2013-04-15T04:39:47Z 2013-04-15T04:39:47Z 2013 2013 Final Year Project (FYP) http://hdl.handle.net/10356/51884 en Nanyang Technological University 35 p. application/pdf
institution Nanyang Technological University
building NTU Library
country Singapore
collection DR-NTU
language English
topic DRNTU::Social sciences::Economic theory::Money and banking
spellingShingle DRNTU::Social sciences::Economic theory::Money and banking
Chong, Chee Wah
Low, Ji Teng
Paik, Jek Yin
Applicability of behavioural finance
description It is believed that investor sentiment is correlated to stock market returns, making consistent positive (or negative) return on stocks investing possible and as such, disreputing the Efficient Market Hypothesis (EMH). Various literatures have put forth the notion that investor sentiment, investing behaviors, or degree of fear (henceforth shall all be known as ‘market sentiment’) is correlated to stock market returns. These researches are done either through mathematical proving and/or through careful analysis of financial surveys. This paper attempts to answer the question: what are some of the most effective ways of measuring the investor sentiments? And are these measures of investor sentiment valid when used to explain market anomalies through the use of Capital Asset Pricing Model (CAPM)? In order to identify the most statistically significant gauges of investors’ behaviors, a few prominent methodologies and its resulting economic indices have been analysed. Specifically, they were the (i) Volatility Index (VIX), (ii) Consumer Sentiment Index (CSI), (iii) Bull-Bear Spread Index (BBS) and the (iv) Investor Sentiment Index (ISI). Relationship between abnormal return represented by the market alpha and the investor sentiment represented by various confidence variables has been constructed. At the end of the paper, the results will show that CSI is the only measure of investor sentiments that can be incorporated into CAPM in explaining the stock alpha.
author2 School of Humanities and Social Sciences
author_facet School of Humanities and Social Sciences
Chong, Chee Wah
Low, Ji Teng
Paik, Jek Yin
format Final Year Project
author Chong, Chee Wah
Low, Ji Teng
Paik, Jek Yin
author_sort Chong, Chee Wah
title Applicability of behavioural finance
title_short Applicability of behavioural finance
title_full Applicability of behavioural finance
title_fullStr Applicability of behavioural finance
title_full_unstemmed Applicability of behavioural finance
title_sort applicability of behavioural finance
publishDate 2013
url http://hdl.handle.net/10356/51884
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