Sentiment and Stock Characteristics: Comprehensive Study of Individual Investor Influence on Returns, Volatility, and Trading Volumes

Aleš Kresta; Jialei Xiong; Bahate Maidiya

doi:10.2478/bsrj-2024-0018

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Sentiment and Stock Characteristics: Comprehensive Study of Individual Investor Influence on Returns, Volatility, and Trading Volumes

Business Systems Research Journal

Volume 15 (2024): Issue 2 (December 2024)

By: Aleš Kresta, Jialei Xiong and Bahate Maidiya

Open Access

|Oct 2024

Abstract

Background

Traditional asset pricing models face challenges from financial anomalies, prompting exploration through behavioural finance theory. This study analyses the nuanced relationship between individual investor sentiment and key stock market variables.

Objectives

To assess the impact of individual investor sentiment on stock returns, volatilities, and trading volumes using the American Association of Individual Investors (AAII) sentiment index.

Methods/Approach

Using regression models, we examine the relationship between individual investor sentiment and various stock characteristics across 480 components of the Standard & Poor's 500 index.

Results

We find a positive relationship between the AAII sentiment index and stock returns and a negative relationship with volatility and trading volume.

Conclusions

Our study contributes to understanding the intricate role of individual investor sentiment in financial markets.

References

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Articles in this issue

DOI: https://doi.org/10.2478/bsrj-2024-0018 | Journal eISSN: 1847-9375 | Journal ISSN: 1847-8344

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Language: English

Page range: 67 - 82

Submitted on: Jan 23, 2024

Accepted on: Jul 26, 2024

Published on: Oct 10, 2024

Published by: IRENET - Society for Advancing Innovation and Research in Economy

In partnership with: Paradigm Publishing Services

Publication frequency: 2 issues per year

Keywords:

investor sentiment,

stock characteristics,

behavioural finance,

AAII sentiment index

Related subjects:

Business and economics,

Business management,

Management, organization, corporate governance,

Business management, other,

Mathematics and statistics for economists,

Mathematics

© 2024 Aleš Kresta, Jialei Xiong, Bahate Maidiya, published by IRENET - Society for Advancing Innovation and Research in Economy
This work is licensed under the Creative Commons Attribution 4.0 License.

Volume 15 (2024): Issue 2 (December 2024)