Retail Investor Sentiment And Behavior
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| Author | : Matthias Burghardt |
| Publisher | : Springer Science & Business Media |
| Total Pages | : 170 |
| Release | : 2011-03-16 |
| Genre | : Business & Economics |
| ISBN | : 3834961701 |
Using a unique data set consisting of more than 36.5 million submitted retail investor orders over the course of five years, Matthias Burghardt constructs an innovative retail investor sentiment index. He shows that retail investors’ trading decisions are correlated, that retail investors are contrarians, and that a profitable trading strategy can be based on these aggregated sentiment measures.
| Author | : |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2023-10-06 |
| Genre | : |
| ISBN | : |
In 'Unlocking the Equity Market: Understanding Retail Investor Behavior, Biases, and Their Market-Wide Impacts, ' readers embark on a fascinating exploration of the intricate world of retail investing. This insightful work delves into the psychology and behavior of retail investors, unraveling the biases and decisionmaking processes that shape the equity market. The narrative unfolds as a deep dive into the minds of retail investors, dissecting their behavior and exploring the psychological biases that influence their market interactions. Through comprehensive research and real-world examples, the book illuminates the complexities of investor sentiment, shedding light on how emotions, cognitive biases, and social factors impact trading decisions. Readers are guided through the various cognitive biases that often lead to irrational market behavior, from overconfidence and loss aversion to herding and anchoring. The book emphasizes the profound impact of these biases not only on individual investors but also on market-wide trends, showcasing how collective retail investor behavior can influence stock prices and market volatility. 'Unlocking the Equity Market' serves as a valuable resource for both novice and experienced investors, offering insights into the underlying factors that drive market fluctuations. It equips readers with a deep understanding of retail investor behavior, enabling them to navigate the equity market with a more informed and analytical perspective. As readers delve into the complexities of investor biases, they gain valuable insights that can help them make more rational and strategic investment decisions, unlocking the potential for success in the ever-changing world of equity trading.
| Author | : Daniele Ballinari |
| Publisher | : |
| Total Pages | : |
| Release | : 2021 |
| Genre | : |
| ISBN | : |
The first paper investigates the predictive power of investors' sentiment and attention for the stock returns' volatility. We introduce a novel and extensive dataset that combines information from social media platforms, news articles, search engine data, and information consumption. Applying a state-of-the-art sentiment classification technique, we construct measures of investors' sentiment and attention for 18 U.S. stocks and the financial market in general. We identify investors' attention, as measured by the number of Google searches on financial keywords (e.g. «financial market» and «stock market»), and the daily volume of company-specific short messages posted on the social media platform StockTwits to be the most relevant variables. The second paper investigates a potential driver of the predictive power documented in the first paper. We focus on news releases of 360 U.S. companies from the S&P 500 universe and analyze how investors' attention affects the speed at which new information is incorporated in stock prices. Our results show that higher investors' attention around news releases is related to higher contemporaneous volatility. Further, retail investor attention increases the post-announcement volatility, whereas institutional investor attention has a small but negative impact on volatility on days following news releases. The third paper extends the analysis of the first paper to the multivariate stock return volatility. Building on the theoretical and empirical evidence that links the price comovements with retail investors' behavior, we analyze the predictive power of retail investors' sentiment and attention for the realized correlation matrix of 35 Dow Jones stocks. We propose a new model of realized covariances that allows exogenous predictors to influence the correlation dynamics while ensuring the predicted matrices' positive definiteness. Using this model, we find retail investors' attention to have predictive power for return correlations, especially for longer forecasting horizons and during the COVID-19 pandemic. The last paper analyzes in more detail the time-series properties of the daily online investor sentiment measures used in the first two papers. We detect structural breaks in the sentiment series for most of the 360 U.S. companies considered in this paper. We illustrate the economic significance of this finding with a return prediction exercise.
| Author | : Richard L. Peterson |
| Publisher | : John Wiley & Sons |
| Total Pages | : 374 |
| Release | : 2016-03-21 |
| Genre | : Business & Economics |
| ISBN | : 1119122767 |
In his debut book on trading psychology, Inside the Investor’s Brain, Richard Peterson demonstrated how managing emotions helps top investors outperform. Now, in Trading on Sentiment, he takes you inside the science of crowd psychology and demonstrates that not only do price patterns exist, but the most predictable ones are rooted in our shared human nature. Peterson’s team developed text analysis engines to mine data - topics, beliefs, and emotions - from social media. Based on that data, they put together a market-neutral social media-based hedge fund that beat the S&P 500 by more than twenty-four percent—through the 2008 financial crisis. In this groundbreaking guide, he shows you how they did it and why it worked. Applying algorithms to social media data opened up an unprecedented world of insight into the elusive patterns of investor sentiment driving repeating market moves. Inside, you gain a privileged look at the media content that moves investors, along with time-tested techniques to make the smart moves—even when it doesn’t feel right. This book digs underneath technicals and fundamentals to explain the primary mover of market prices - the global information flow and how investors react to it. It provides the expert guidance you need to develop a competitive edge, manage risk, and overcome our sometimes-flawed human nature. Learn how traders are using sentiment analysis and statistical tools to extract value from media data in order to: Foresee important price moves using an understanding of how investors process news. Make more profitable investment decisions by identifying when prices are trending, when trends are turning, and when sharp market moves are likely to reverse. Use media sentiment to improve value and momentum investing returns. Avoid the pitfalls of unique price patterns found in commodities, currencies, and during speculative bubbles Trading on Sentiment deepens your understanding of markets and supplies you with the tools and techniques to beat global markets— whether they’re going up, down, or sideways.
| Author | : Woody Dorsey |
| Publisher | : Texere Publishing |
| Total Pages | : 0 |
| Release | : 2003 |
| Genre | : Business & Economics |
| ISBN | : 9781587991646 |
Dorsey, a publisher of market commentary since 1985, explains market semiotics, his market research philosophy based on the logic of behavioral finance. His proprietary market diagnosis techniques have been described as market expectations theory, behavioral finance, and contrary opinion analysis. Annotation ♭2004 Book News, Inc., Portland, OR (booknews.com).
| Author | : Matthias Burghardt |
| Publisher | : |
| Total Pages | : 30 |
| Release | : 2009 |
| Genre | : |
| ISBN | : |
Using a unique data set with 18.1 million transactions in bank-issued warrants from the European Warrant Exchange, we compute a retail investor sentiment index. We show that retail investors are contrarian, that retail investor sentiment is an important part of the equity pricing process and that we have a good measure of the sentiment. Moreover, our measure is better than existing measures for our sample period between January 2004 and December 2007. In addition, we show evidence that this data may be used for trading strategies that generate excess returns. As a whole our findings further support a role for retail investor sentiment in the equity pricing process.
| Author | : David Bourghelle |
| Publisher | : Springer Nature |
| Total Pages | : 228 |
| Release | : 2023-04-05 |
| Genre | : Business & Economics |
| ISBN | : 3031244869 |
In recent decades, the financial markets have experienced various crises, shocks and disruptive events, driving high levels of volatility. This volatility is too strong to be fully justified simply by changes in fundamentals. This volume discusses these highly relevant issues with special focus on asset pricing and behavioral finance. Financial price assets of the 2020s appear to be driven by various attractors in addition to fundamentals, and there is no doubt that investor emotions, market sentiment, the news, and external factors such as uncertainty all play a key role. This has been clearly observed in recent years, especially during the ongoing coronavirus pandemic that has changed the common perception of the way financial markets work.
| Author | : Andrei Shleifer |
| Publisher | : OUP Oxford |
| Total Pages | : 225 |
| Release | : 2000-03-09 |
| Genre | : Business & Economics |
| ISBN | : 0191606898 |
The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents and empirically evaluates models of such inefficient markets. Behavioral finance models both explain the available financial data better than does the efficient markets hypothesis and generate new empirical predictions. These models can account for such anomalies as the superior performance of value stocks, the closed end fund puzzle, the high returns on stocks included in market indices, the persistence of stock price bubbles, and even the collapse of several well-known hedge funds in 1998. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets.
| Author | : Mohammed Saad H Alhashim |
| Publisher | : |
| Total Pages | : 119 |
| Release | : 2021 |
| Genre | : Behavioral assessment |
| ISBN | : |
In the first essay, I examine the effect of social media sentiment on the trading behavior of individual investors. I document a positive association between sentiment and retail order imbalances (i.e., individual investors tend to buy more than they sell as they become more optimistic about stocks). The association between retail investor activity and sentiment is stronger for hard-to-value stocks (small cap, low institutional ownership, and low analyst coverage firms). Finally, the association between retail order imbalances and stock returns exists only in conjunction with investor sentiment. In the second essay, I consider the effect of firm-level sentiment extracted from a social network platform on the presence of herding behavior in the US equity market. Applying a quantile regression model enables me to investigate the existence of herding during both quiet periods and extreme market movements. I also benefit from using different sampling frequencies (daily, weekly, and monthly) for detecting investor herding. I document an asymmetric association between herding and investor sentiment. Herding is present in low-optimism portfolios but not in high-optimism portfolios. I also find evidence of herding in intermediate quantiles (i.e., relatively quiet market periods but not during extreme market movements). The degree of investor attention has a moderating impact on the relationship between investor optimism and the tendency to herd, with herding being more intense among low-optimism stocks. I also find evidence that trading volume drives herding behavior. In the third essay, I estimate the impact of investor sentiment in the stock market on the return and volatility spillover risks between real estate investment trusts (REITs) and a broader equity index. The total return spillover risk from equity market to real estate is higher for low-optimism portfolios (45.76%) relative to high-optimism portfolios (41.41%). I do not document any significant impact of investor sentiment on the volatility spillover risk between REITs and the equity market (34.85% versus 34.17%). My results highlight the importance of considering investor sentiment in the stock market when constructing multi-asset portfolios that include REITs in addition to other asset classes.
| Author | : Jamie Saettele |
| Publisher | : John Wiley & Sons |
| Total Pages | : 208 |
| Release | : 2017-11-06 |
| Genre | : Business & Economics |
| ISBN | : 0470208236 |
Crowds move markets and at major market turning points, the crowds are almost always wrong. When crowd sentiment is overwhelmingly positive or overwhelmingly negative ? it's a signal that the trend is exhausted and the market is ready to move powerfully in the opposite direction. Sentiment has long been a tool used by equity, futures, and options traders. In Sentiment in the Forex Market, FXCM analyst Jaime Saettele applies sentiment analysis to the currency market, using both traditional and new sentiment indicators, including: Commitment of Traders reports; time cycles; pivot points; oscillators; and Fibonacci time and price ratios. He also explains how to interpret news coverage of the markets to get a sense of when participants have become overly bullish or bearish. Saettele points out that several famous traders such as George Soros and Robert Prechter made huge profits by identifying shifts in crowd sentiment at major market turning points. Many individual traders lose money in the currency market, Saettele asserts, because they are too short-term oriented and trade impulsively. He believes retail traders would be much more successful if they adopted a longer-term, contrarian approach, utilizing sentiment indicators to position themselves at the beginning points of major trends.
