Individual Investors' Sentiment and Temporary Stock Price Pressure

14 Pages Posted: 12 Jul 2004

See all articles by Raymond Siu Yeung Chan

Raymond Siu Yeung Chan

Hong Kong Baptist University

Wai Ming Fong

The Chinese University of Hong Kong (CUHK) - Department of Finance

Abstract

Using data for the Hong Kong stock market, where individual investors' sentiment is likely to be influential, this study finds that the publication of individual investors' sentiment temporarily affects stock prices regardless of the publication's incompetence in predicting stock returns. Specifically, when the publication reports that more and more investors are optimistic, the return on the day just after the publication is higher and the return several days later is lower. Furthermore, the results are strongest for small stocks, and weakest for large stocks. It seems that some individual investors buy (sell) stocks when others, as reported by the publication, are optimistic (pessimistic), and that the trading causes temporary buying (selling) pressure initially and price reversals afterwards.

JEL Classification: G12, G14

Suggested Citation

Chan, Raymond Siu Yeung and Fong, Wai Ming, Individual Investors' Sentiment and Temporary Stock Price Pressure. Journal of Business Finance & Accounting, Vol. 31, No. 5-6, pp. 823-836, June 2004. Available at SSRN: https://ssrn.com/abstract=563437

Raymond Siu Yeung Chan (Contact Author)

Hong Kong Baptist University ( email )

Kowloon
Hong Kong

Wai Ming Fong

The Chinese University of Hong Kong (CUHK) - Department of Finance ( email )

Shatin, N.T.
Hong Kong

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