Predictive effect of investor sentiment on current and future returns in emerging equity markets

PLoS One. 2023 May 18;18(5):e0281523. doi: 10.1371/journal.pone.0281523. eCollection 2023.

Abstract

This study uses Non-linear Predictive Regression Analysis to analyze the effect of investor sentiment on the returns of the selected developing equity markets, including Brazil, South Africa, Indonesia, India, China, Russia, and Pakistan. The Principal Component Analysis is applied to construct an Investor Sentiment Index. In most selected countries, investor sentiment substantially affects contemporaneous market returns, and this effect remains persistent in the short term. However, it becomes less prominent over time. It suggests that stakeholders should give importance to the investors' sentiments while making investment decisions.

MeSH terms

  • Brazil
  • China
  • Decision Making*
  • India
  • Indonesia

Grants and funding

The authors received no specific funding for this work.