Measuring Impact of Market Sentiment on Stock Prices


Authors : Neha Begum

Volume/Issue : Volume 9 - 2024, Issue 10 - October


Google Scholar : https://tinyurl.com/36zx9pep

Scribd : https://tinyurl.com/49umr2xk

DOI : https://doi.org/10.38124/ijisrt/IJISRT24OCT601

Note : A published paper may take 4-5 working days from the publication date to appear in PlumX Metrics, Semantic Scholar, and ResearchGate.


Abstract : This study considers the impact of investor sentiment on stock market prices, it is when something beyond traditional economic factors, such as emotions or perceptions that play dominating role in driving psychological and real pricing. This behaviour in investor sentiment often leads to irrational decision making, always influenced by news, social media and the movements of markets. This will make stocks price more volatile. Through sentiment analysis, historical stock data and behavioural finance models the study examines times when there were significant movements in the market. These trends suggest that happy days can cause major prices to rise (along with the sun) and bad news can punch holes in a report even if business hasn't really looked any worse. The regulators and the investors should understand that sentiment can improve the efficiency of the stock price-prediction algorithms as well as bring anomalies to light in the market. The study of market sentiment and its effect on the stock price. In the given paper of research, it is easy to notice the impact of interaction between investor sentiment and stock price.

Keywords : Stock Price, Market Sentiment, Investor Sentiment.

References :

  1. Wurgler, J., and Baker, M. (2006). The cross-section of stock returns and the sentiment of investors. 1645–1680 in The Journal of Finance, 61(4).
  2. To be read to understand how investor mood impacts on returns of equities especially regarding to smaller more volatile stocks.
  3. R. J. Shiller (2000). Exuberance Without Reason.
  4. Tversky, A, and D. Kahneman (1979): A risk-averse decision-making framework. 263-292 in Econometric
    •\\tThis was a pioneering research that showed behavioral biases such as loss aversion that have more extensive implications on sentiment-driven stock market decisions.
  5. According to Tetlock. The role of the media in the stock market: providing material to investor emotion. 1139–1168 in The Journal of Finance, 62(3).
  6. \\tTetlock relates the analysis behind news sentiment with market activity to show how media sentiment impacts the price of stocks.
  7. Barberis, N., Vishny, R., and Shleifer, A. (1998). An investor sentiment model. 307–343, Journal of Financial Economics, 49(3).
  8. This paper identifies and discusses psychosocial mechanisms from which mispricing in financial markets is derived and predicts how investor sentiment will impact prices.
  9. Shumway, T., and D. Hirshleifer (2003). Greetings, sun: the weather and stock returns. 1009–1032 in The Journal of Finance, 58(3).
  10. This would confirm the argument that issues are non-fundamental issues influencing the market and thus far-flung with stock returns and investor sentiment, as explained in the discussion of this paper.
  11. Fama (E. F.) 1998. Behavioral finance, long-term returns, and market efficiency. 49(3), 283-306, Journal of Financial Economics.
  12. In this paper, Fama discusses anomalies caused by sentiment and behavioral factors while he reviews evidence which refutes the Efficient Market Hypothesis.
  13. Wurgler, J., and Baker, M. (2007). Investor views regarding the stock market. 129–152 in Journal of Economic Perspectives, 21(2).

This study considers the impact of investor sentiment on stock market prices, it is when something beyond traditional economic factors, such as emotions or perceptions that play dominating role in driving psychological and real pricing. This behaviour in investor sentiment often leads to irrational decision making, always influenced by news, social media and the movements of markets. This will make stocks price more volatile. Through sentiment analysis, historical stock data and behavioural finance models the study examines times when there were significant movements in the market. These trends suggest that happy days can cause major prices to rise (along with the sun) and bad news can punch holes in a report even if business hasn't really looked any worse. The regulators and the investors should understand that sentiment can improve the efficiency of the stock price-prediction algorithms as well as bring anomalies to light in the market. The study of market sentiment and its effect on the stock price. In the given paper of research, it is easy to notice the impact of interaction between investor sentiment and stock price.

Keywords : Stock Price, Market Sentiment, Investor Sentiment.

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