Understanding Investor behavior and it's implications on Capital Markets - The Indian Context

Bhaduri, Saumitra and Gupta, Saurabh (2015): Understanding Investor behavior and it's implications on Capital Markets - The Indian Context.

Abstract

The paper proposes a dynamic factor model to augment the conventional three factor Fama and French – CAPM, by introducing two distinct latent variables which constitute investor behavior i.e. market sentiment and herding. Our analysis suggests that both factors significantly impact the asset pricing. Also, the herding factor portrays an erratic behavior during the crisis period whereas sentiment remains persistent across time.

• Item Type: MPRA Paper
• Language: English
• Keywords: Sentiment, Herding, Dynamic Factor Model, Capital Asset Pricing Model
• Subjects: G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions

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