Trading Behaviour and Market Sentiment: Firm-level Evidence from an Emerging Islamic Market

Anup Chowdhury; Moshfique Uddin; Keith Philip Anderson

doi:10.1016/j.gfj.2021.100621

Trading Behaviour and Market Sentiment: Firm-level Evidence from an Emerging Islamic Market

Anup Chowdhury, Moshfique Uddin, Keith Philip Anderson

Management

Research output: Contribution to journal › Article › peer-review

Abstract

We provide firm-level evidence from an emerging Islamic market that individual investors’ trading behaviour causes weekend sentiment. Using data for 285 companies listed on the Dhaka Stock Exchange (DSE) for the period from 2002 to 2019 and applying appropriate econometric techniques, the paper has found evidence of a weekend effect both on return and volatility. The results confirm that individual investors’ sentiment drives the weekend effect on the DSE. The ‘information content theory’ and ‘information processing hypothesis’ work for investors so that the market return and volatility become significantly different on Sunday. The market sentiment effect is significant for smaller firms and low dividend yield firms where individual investors are prevalent, suggesting that the trading behaviour of individual investors determines weekend sentiment. A positive feedback relationship exists between returns on Sunday and the previous Thursday for both institutions and individuals. Our results are robust in various alternative specifications.

Original language	English
Article number	100621
Number of pages	19
Journal	Global Finance Journal
Volume	53
Early online date	16 Jul 2022
DOIs	https://doi.org/10.1016/j.gfj.2021.100621
Publication status	Published - 1 Aug 2022

Bibliographical note

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10.1016/j.gfj.2021.100621

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© 2021 Elsevier Inc. This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy
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Cite this

@article{4aae47ca899945f78563e3dee25c05fb,

title = "Trading Behaviour and Market Sentiment: Firm-level Evidence from an Emerging Islamic Market",

abstract = "We provide firm-level evidence from an emerging Islamic market that individual investors{\textquoteright} trading behaviour causes weekend sentiment. Using data for 285 companies listed on the Dhaka Stock Exchange (DSE) for the period from 2002 to 2019 and applying appropriate econometric techniques, the paper has found evidence of a weekend effect both on return and volatility. The results confirm that individual investors{\textquoteright} sentiment drives the weekend effect on the DSE. The {\textquoteleft}information content theory{\textquoteright} and {\textquoteleft}information processing hypothesis{\textquoteright} work for investors so that the market return and volatility become significantly different on Sunday. The market sentiment effect is significant for smaller firms and low dividend yield firms where individual investors are prevalent, suggesting that the trading behaviour of individual investors determines weekend sentiment. A positive feedback relationship exists between returns on Sunday and the previous Thursday for both institutions and individuals. Our results are robust in various alternative specifications.",

author = "Anup Chowdhury and Moshfique Uddin and Anderson, {Keith Philip}",

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doi = "10.1016/j.gfj.2021.100621",

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AB - We provide firm-level evidence from an emerging Islamic market that individual investors’ trading behaviour causes weekend sentiment. Using data for 285 companies listed on the Dhaka Stock Exchange (DSE) for the period from 2002 to 2019 and applying appropriate econometric techniques, the paper has found evidence of a weekend effect both on return and volatility. The results confirm that individual investors’ sentiment drives the weekend effect on the DSE. The ‘information content theory’ and ‘information processing hypothesis’ work for investors so that the market return and volatility become significantly different on Sunday. The market sentiment effect is significant for smaller firms and low dividend yield firms where individual investors are prevalent, suggesting that the trading behaviour of individual investors determines weekend sentiment. A positive feedback relationship exists between returns on Sunday and the previous Thursday for both institutions and individuals. Our results are robust in various alternative specifications.

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