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Investor Sentiment and Stock Returns: Evidence from the Athens Stock Exchange

Gizelis, Demetrios and Chowdhury, Shah (2016): Investor Sentiment and Stock Returns: Evidence from the Athens Stock Exchange.

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Abstract A plethora of academic research has been under way investigating the effect of individual investor sentiment on stock returns. It seems that the issue is not resolved yet because the empirical findings are not entirely conclusive. Most authors argue that there is a place for sentiment as a determining factor in the stock retu rn generating process while several others find that it is exactly the opposite. This paper aims at contributing to the existing debate by examining the relationship between investor sentiment and stock market returns of firms listed in the Athens Stock Exchange. We employ two investor sentiment prox ies, a direct and an indirect. As the direct me asurement of sentiment we use the historical investor sentiment indicators compiled by the European Commission, and for the indirect one we resort to the closed - end equity fund discount/premium. Using monthly data for the period January 199 5 to April 2014 the regression results indicate that investor sentiment weakly explains returns. B ecause this type of risk is not diversifiable, for practical purposes somehow it ought to be priced. Thus, it appears t hat behavio ral factors may be consider ed in empirical asset pricing models for the Greek market.

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