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The Role of Market Sentiment in Stock Price Movements: An Indian Experience

The Role of Market Sentiment in Stock Price Movements: An Indian Experience

Kiranjit Sett, Debabrata Mukhopadhyay
Copyright: © 2015 |Pages: 20
ISBN13: 9781466682740|ISBN10: 1466682744|EISBN13: 9781466682757
DOI: 10.4018/978-1-4666-8274-0.ch002
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MLA

Sett, Kiranjit, and Debabrata Mukhopadhyay. "The Role of Market Sentiment in Stock Price Movements: An Indian Experience." Handbook of Research on Globalization, Investment, and Growth-Implications of Confidence and Governance, edited by Ramesh Chandra Das, IGI Global, 2015, pp. 24-43. https://doi.org/10.4018/978-1-4666-8274-0.ch002

APA

Sett, K. & Mukhopadhyay, D. (2015). The Role of Market Sentiment in Stock Price Movements: An Indian Experience. In R. Das (Ed.), Handbook of Research on Globalization, Investment, and Growth-Implications of Confidence and Governance (pp. 24-43). IGI Global. https://doi.org/10.4018/978-1-4666-8274-0.ch002

Chicago

Sett, Kiranjit, and Debabrata Mukhopadhyay. "The Role of Market Sentiment in Stock Price Movements: An Indian Experience." In Handbook of Research on Globalization, Investment, and Growth-Implications of Confidence and Governance, edited by Ramesh Chandra Das, 24-43. Hershey, PA: IGI Global, 2015. https://doi.org/10.4018/978-1-4666-8274-0.ch002

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Abstract

In an efficient capital market, the prices of securities always fully reflect all available information implying that prices always reflect the fundamental values. When there is under reaction or over reaction to new information, competition among the arbitrageurs quickly brings the price of an asset back to its fair value. But, if the asymmetry of information about a stock is high and there is a ‘limit to arbitrage', sentiment of the noise traders is likely to influence the price of that stock. This chapter aims at studying the role of market sentiment, during the period which starts with June 2003 and ends with July 2011, in influencing the return from investment in small capitalization stocks listed on Indian stock exchanges. We have found the presence of ARCH (1) in the time series on returns. Market sentiment, rate of interest and inflation are found to have significant influence on return from investment in small capitalization stocks. The presence of month effects in returns from such stocks has also been detected.

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