The effect of investor sentiment, individual and institutional investors trading behavior on stock  excess return in TSE with a 8 factors model

Tehrani, Reza; Abbasian, Ezzatollah; Mirlohi, Seyyed Mojtaba; Bayati, Hasan

doi:10.22034/iaar.2021.145043

The effect of investor sentiment, individual and institutional investors trading behavior on stock excess return in TSE with a 8 factors model

Document Type : Original Article

Authors

Reza Tehrani ¹

Ezzatollah Abbasian ²

Seyyed Mojtaba Mirlohi ³

Hasan Bayati ⁴

¹ Professor,Management Faculty, Tehran university, Tehran, Iran

² Associate Professor, Department of Public Administration, Management Faculty, Tehran university, Tehran, Iran

³ Assistant Professor, Faculty of Industry and management, Shahrood University of Technology, Shahroud, Iran

⁴ CEO of Irandar Co.

10.22034/iaar.2021.145043

Abstract

In recent researches in the field of financial markets and stock exchanges, determinig the effect of behavioral variables such as investor sentiment and trading behavior along with fundamental variables, has attracted the attention of most financial researchers, especially those of behavioral finance. In this study, in order to investigate the effect of investor sentiment and trading behavior on stock excess return, using data of 159 companies listed in Tehran Stock Exchange (TSE) during the period from 1388 to 1395, three behavioral variables including the "Investor sentiment index", "Individual investors trading behavior index " and " Institutional investors trading behavior index " were calculated and added to Fama and French 5 factor model,to achieve a new 8 factor model with a combination of fundamental and behavioral variables. Then, by analyzing multiple regression with panel data, the explanatory capability and goodnes of fit index of the new 8 factor model is compared with the FF 5 factor model and the effect of each index on stock excess return, has been investigated. The results show that, adding these three behavioral variables improves the FF 5 factor model, and the 8 factor model, fits better than FF 5 factor model in explaining the " stock excess return". Meanwhile, the effect of investor sentiment is more than the effect of investors trading behavior.

Keywords

Investor Sentiment

Investor Trading Behavior

Indivisual Investor

Institutional Investor

Surplus Return