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

Bouteska, Ahmed; Sharif, Taimur; Abedin, Mohammad

doi:10.1002/ijfe.2836

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

Ahmed Bouteska

, Taimur Sharif, Mohammad Abedin

International Journal of Finance and Economics, Volume: 29, Issue: 3, Pages: 3487 - 3509

Swansea University Author: Mohammad 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 2024
Online Access:	Check full text
URI:	https://cronfa.swan.ac.uk/Record/cronfa63609
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first_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 Mohammad Abedin Mohammad Abedin true false 2023-06-07 CBAE 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 29 3 3487 3509 Wiley 1076-9307 1099-1158 Asset pricing anomalies, asset pricing modelling, behavioural finance, factor model, investor sentiment, Korean stock market 1 7 2024 2024-07-01 10.1002/ijfe.2836 COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University SU Library paid the OA fee (TA Institutional Deal) Swansea University 2024-09-17T12:35:39.7133319 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 Mohammad 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 Mohammad 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_***_Mohammad Abedin
author	Mohammad Abedin
author2	Ahmed Bouteska Taimur Sharif Mohammad Abedin
format	Journal article
container_title	International Journal of Finance and Economics
container_volume	29
container_issue	3
container_start_page	3487
publishDate	2024
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
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hierarchy_top_title	Faculty of Humanities and Social Sciences
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department_str	School of Management - Business Management{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Business Management
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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	2024-07-01T12:35:39Z
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Does investor sentiment create value for asset pricing? An empirical investigation of the KOSPI-listed firms

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