Investor sentiment and stock market returns: A story of night and day

Wang, Wenzhao

Abstract

Some financial relations have been confirmed to be different overnight and intraday due to different clienteles. In this paper, we assess the impact of investor sentiment on stock market returns in 30 international stock markets overnight and intraday. At the global level, empirical evidence reveals a negative sentiment-return relation in both non-trading and trading hours, and the relation is stronger intraday than overnight, indicating that overnight traders are more rational than intraday traders. The separation between developed and emerging markets does not distort the negative relation or the stronger impact intraday. At the individual market level, results reveal a high degree of heterogeneity in the sentiment-return relation, in terms of both influence direction and magnitude. The heterogeneity can be explained by cross-market differences in cultural dimensions and market integrity, and notably, such influence varies across night and day, suggesting that the influence of the two aspects may be more complex than we used to theorize and therefore, future studies applying the cross-market analytical framework may take different clienteles into account.

Citation

Wang, W. (2024). Investor sentiment and stock market returns: A story of night and day. European Journal of Finance, 30(13), 1437-1469. https://doi.org/10.1080/1351847X.2024.2306942

• Journal Article Type: Article
• Acceptance Date: Jan 11, 2024
• Online Publication Date: Jan 24, 2024
• Publication Date: 2024
• Deposit Date: Jan 17, 2024
• Publicly Available Date: Feb 2, 2024
• Print ISSN: 1351-847X
• Electronic ISSN: 1466-4364
• Publisher: Routledge
• Peer Reviewed: Peer Reviewed
• Volume: 30
• Issue: 13
• Pages: 1437-1469
• DOI: https://doi.org/10.1080/1351847X.2024.2306942
• Keywords: Consumer confidence index (CCI), culture, intraday, investor sentiment, market integrity, overnight
• Public URL: http://researchrepository.napier.ac.uk/Output/3484951