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Does investor sentiment create value for asset pricing? An empirical investigation of the KOSPI-listed firms

Ahmed Bouteska Orcid Logo, Taimur Sharif, Abedin Abedin

International Journal of Finance and Economics

Swansea University Author: Abedin Abedin

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DOI (Published version): 10.1002/ijfe.2836

Abstract

This paper proposes the development of an improved investor sentiment index (ISI) to apply on the Korea Composite Stock Price Index (KOSPI) and assess the vitality of sentiment-based factor for explaining critical equity market anomalies in asset pricing in Korea. We follow the methodology of Huang...

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Published in: International Journal of Finance and Economics
ISSN: 1076-9307 1099-1158
Published: Wiley
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URI: https://cronfa.swan.ac.uk/Record/cronfa63609
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first_indexed 2023-06-21T14:07:39Z
last_indexed 2023-06-21T14:07:39Z
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spelling v2 63609 2023-06-07 Does investor sentiment create value for asset pricing? An empirical investigation of the KOSPI-listed firms 4ed8c020eae0c9bec4f5d9495d86d415 Abedin Abedin Abedin Abedin true false 2023-06-07 BAF This paper proposes the development of an improved investor sentiment index (ISI) to apply on the Korea Composite Stock Price Index (KOSPI) and assess the vitality of sentiment-based factor for explaining critical equity market anomalies in asset pricing in Korea. We follow the methodology of Huang et al. (2015), the align sentiment index, and employ the partial least squares method to overcome the drawbacks of the pioneering BM index of Baker and Wurgler (2006, 2007). Based on the daily trading and price data for individual companies from 2006 to 2021, we construct a novel ISI, which has robust predicting ability for the aggregate stock market return, in comparison to other popular measures of sentiment in the contemporary finance literature. Furthermore, the sentiment-based factor in this paper captures the small firm effect that the asset pricing modelling, containing the more topical Fama–French five factor modelling (5F-FF), has struggled to illuminate completely. Given that our results have shown Korean stock market as fairly well-organised in terms of the availability of the market intelligence, we speculate our results to have important managerial implications for financial regulators in Korea and countries holding similar economic features. Journal Article International Journal of Finance and Economics 0 Wiley 1076-9307 1099-1158 Asset pricing anomalies, asset pricing modelling, behavioural finance, factor model, investor sentiment, Korean stock market 0 0 0 0001-01-01 10.1002/ijfe.2836 http://dx.doi.org/10.1002/ijfe.2836 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University SU Library paid the OA fee (TA Institutional Deal) Swansea University 2023-10-12T15:28:28.9208013 2023-06-07T17:14:42.4381417 Faculty of Humanities and Social Sciences School of Management - Business Management Ahmed Bouteska 0000-0002-5710-501x 1 Taimur Sharif 2 Abedin Abedin 3 63609__27920__f4f2aaa7d1074c8ebb5f0d3374e7da57.pdf 63609.pdf 2023-06-21T15:06:32.6459483 Output 1417853 application/pdf Version of Record true © 2023 The Authors. International Journal of Finance & Economics published by John Wiley & Sons Ltd. Distributed under the terms of a Creative Commons Attribution 4.0 License (CC BY 4.0). true eng http://creativecommons.org/licenses/by/4.0/
title Does investor sentiment create value for asset pricing? An empirical investigation of the KOSPI-listed firms
spellingShingle Does investor sentiment create value for asset pricing? An empirical investigation of the KOSPI-listed firms
Abedin Abedin
title_short Does investor sentiment create value for asset pricing? An empirical investigation of the KOSPI-listed firms
title_full Does investor sentiment create value for asset pricing? An empirical investigation of the KOSPI-listed firms
title_fullStr Does investor sentiment create value for asset pricing? An empirical investigation of the KOSPI-listed firms
title_full_unstemmed Does investor sentiment create value for asset pricing? An empirical investigation of the KOSPI-listed firms
title_sort Does investor sentiment create value for asset pricing? An empirical investigation of the KOSPI-listed firms
author_id_str_mv 4ed8c020eae0c9bec4f5d9495d86d415
author_id_fullname_str_mv 4ed8c020eae0c9bec4f5d9495d86d415_***_Abedin Abedin
author Abedin Abedin
author2 Ahmed Bouteska
Taimur Sharif
Abedin Abedin
format Journal article
container_title International Journal of Finance and Economics
container_volume 0
institution Swansea University
issn 1076-9307
1099-1158
doi_str_mv 10.1002/ijfe.2836
publisher Wiley
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Business Management{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Business Management
url http://dx.doi.org/10.1002/ijfe.2836
document_store_str 1
active_str 0
description This paper proposes the development of an improved investor sentiment index (ISI) to apply on the Korea Composite Stock Price Index (KOSPI) and assess the vitality of sentiment-based factor for explaining critical equity market anomalies in asset pricing in Korea. We follow the methodology of Huang et al. (2015), the align sentiment index, and employ the partial least squares method to overcome the drawbacks of the pioneering BM index of Baker and Wurgler (2006, 2007). Based on the daily trading and price data for individual companies from 2006 to 2021, we construct a novel ISI, which has robust predicting ability for the aggregate stock market return, in comparison to other popular measures of sentiment in the contemporary finance literature. Furthermore, the sentiment-based factor in this paper captures the small firm effect that the asset pricing modelling, containing the more topical Fama–French five factor modelling (5F-FF), has struggled to illuminate completely. Given that our results have shown Korean stock market as fairly well-organised in terms of the availability of the market intelligence, we speculate our results to have important managerial implications for financial regulators in Korea and countries holding similar economic features.
published_date 0001-01-01T15:28:29Z
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score 11.012678

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