THE EFFECT OF INVESTOR SENTIMENT ON STOCK RETURNS IN OECD COUNTRIES

Abstract

In this study, the effect of investor sentiment on stock returns in OECD countries was investigated. For this purpose, monthly data on the stock market indices, consumer confidence index, volatility index and trading volume of 17 OECD countries for the period February 2004-August 2021 were used. Interest rate was added to the model as a control variable. Panel data analysis results showed that there is a long-term relationship between investor sentiment and stock market index. It has been determined that consumer confidence index has positive and significant effects on stock market index in both long and short term, while fear index has negative and significant effects. It was seen that trading volume and interest rate had a significant and negative effect only in the long term. In addition, it has been concluded that all variables are the granger cause of the stock market index. The results of the study show that investor sentiment affects stock prices and more successful predictions can be made about the stock index returns of OECD countries by utilizing data on investor sentiment.

Keywords

• Behavioral Finance
• Investor Sentiment
• OECD Countries
• Panel Data Analysis
• ARDL

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