On the impact of sentiment on stock returns: the case of Dhaka Stock Exchange
by Shah Saeed Hassan Chowdhury; Rashida Sharmin; M. Arifur Rahman
Afro-Asian J. of Finance and Accounting (AAJFA), Vol. 11, No. 3, 2021

Abstract: Since frontier markets are dominated by less-informed individual investors, the stock price movements of these markets could be influenced by the sentiment of general investors. This paper investigates the effect of sentiment on the returns of the Dhaka Stock Exchange (DSE), the main stock exchange in Bangladesh. The study uses indirect measures of stock market sentiment. Results show that sentiment impacts contemporaneous returns, followed by some corrections in the next month. Contrary to general belief, large firms are more vulnerable to market sentiment. There is a unidirectional (Granger) causality from market turnover to portfolio returns, and a strong bi-directional causal relationship between moving average changes and stock returns. When conditional volatility is considered, a significant impact of sentiment is observed, mainly on small-size portfolios. In the presence of other market-wide risk factors, sentiment factors reasonably explain individual stock returns. Overall, the study concludes that sentiment should be considered as a source of systematic risk for the firms listed in the DSE.

Online publication date: Wed, 16-Jun-2021

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the Afro-Asian J. of Finance and Accounting (AAJFA):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com