scholarly journals Application of ensemble of recurrent neural networks for forecasting of stock market sentiments

Equilibrium ◽  
2018 ◽  
Vol 13 (1) ◽  
pp. 7-27 ◽  
Author(s):  
Nijole Maknickiene ◽  
Indre Lapinskaite ◽  
Algirdas Maknickas
Keyword(s):  
Stock Market ◽  
Prediction Model ◽  
Financial Markets ◽  
Investor Sentiment ◽  
Value Added ◽  
Individual Investors ◽  
Stock Indices ◽  
Market Dynamic ◽  
Market Instability ◽  
The Individual

Research background: Research and measurement of sentiments, and the integration of methods for sentiment analysis in forecasting models or trading strategies for financial markets are gaining increasing attention at present. The theories that claim it is difficult to predict the individual investor’s decision also claim that individual investors cause market instability due to their irrationality. The existing instability increases the need for scientific research.   Purpose of the article: This paper is dedicated to establishing a link between the individual investors’ behavior, which is expressed as sentiments, and the market dynamic, and is evaluated in the stock market. This article hypothesizes that the dynamics in the market is unequivocally related to the individual investor’s sentiments, and that this relationship occurs when the sentiments are expressed strongly and are unlimited. Methods: The research was carried out invoking the method of Evolino RNN-based prediction model. The data for the research from AAII (American Association of Individual Investors), an investor sentiment survey, were used. Stock indices and sentiments are forecasted separately before being combined as a single composition of distributions. Findings & Value added: The novelty of this paper is the prediction of sentiments of individual investors using an Evolino RNN-based prediction model. The results of this paper should be seen not only as the prediction of the connection and composition of investors’ sentiments and stock indices, but also as the research of the dynamic of individual investors’ sentiments and indices.

Survey of Trading Systems for Individual Investors

2011 ◽  
pp. 157-176 ◽  
Author(s):  
M. Kersch ◽  
G. Schmidt
Keyword(s):  
Financial Markets ◽  
Stock Exchange ◽  
Point Of View ◽  
Individual Investors ◽  
Individual Investor ◽  
Trading System ◽  
Trading Systems ◽  
Trading Decisions ◽  
The Individual

Trading decisions in financial markets can be supported by the use of trading algorithms. To evaluate trading algorithms and to generate orders to be executed on the stock exchange trading systems are used. In this chapter, we define the individual investors’ requirements on a trading system, and analyze 17 trading systems from an individual investor’s point of view. The results of our study point out that the best alternative for an individual investor is not one single trading system, but a combination of two different classes of trading systems.

scholarly journals Investor Sentiment in the Stock Market

2007 ◽  
Vol 21 (2) ◽  
pp. 129-151 ◽  
Author(s):  
Malcolm Baker ◽  
Jeffrey Wurgler
Keyword(s):  
Stock Market ◽  
Behavioral Finance ◽  
Stock Prices ◽  
Investor Sentiment ◽  
Cash Flows ◽  
Individual Investors ◽  
Individual Investor ◽  
Top Down ◽  
Limits To Arbitrage ◽  
Future Cash Flows

Investor sentiment, defined broadly, is a belief about future cash flows and investment risks that is not justified by the facts at hand. The question is no longer whether investor sentiment affects stock prices, but how to measure investor sentiment and quantify its effects. One approach is “bottom up,” using biases in individual investor psychology, such as overconfidence, representativeness, and conservatism, to explain how individual investors underreact or overreact to past returns or fundamentals The investor sentiment approach that we develop in this paper is, by contrast, distinctly “top down” and macroeconomic: we take the origin of investor sentiment as exogenous and focus on its empirical effects. We show that it is quite possible to measure investor sentiment and that waves of sentiment have clearly discernible, important, and regular effects on individual firms and on the stock market as a whole. The top-down approach builds on the two broader and more irrefutable assumptions of behavioral finance—sentiment and the limits to arbitrage—to explain which stocks are likely to be most affected by sentiment. In particular, stocks that are difficult to arbitrage or to value are most affected by sentiment.

scholarly journals Impact of Terrorism on Financial Markets: The Case of Turkey

2016 ◽  
Author(s):  
Neşe Algan ◽  
Mehmet Balcılar ◽  
Harun Bal ◽  
Müge Manga
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Financial Market ◽  
Terrorist Attacks ◽  
Market Returns ◽  
Stock Market Returns ◽  
Stock Indices ◽  
Daily Data ◽  
The Impact

This study investigates the impact of terrorism on the Turkish financial market using daily data from Jan 4, 1988 to May 24, 2016. In order to measure the impacts of terrorist attacks in Turkey we test for causality from terrorism index to returns and volatilities of 3 aggregate and 16 sector level stock indices using a recently developed nonparametric causality-in-test test of Balcilar et al. (2016). The results obtained indicate that there is no causality from terrorist activities to stock market returns (1st moment). However, we find significant causality at various quantiles from terrorist activates to volatility (2nd moment) of tourism, food and basic materials sectors.

Predicting the effect of Googling investor sentiment on Islamic stock market returns

2020 ◽  
Vol 13 (2) ◽  
pp. 165-193
Author(s):  
Yousra Trichilli ◽  
Mouna Boujelbène Abbes ◽  
Afif Masmoudi
Keyword(s):  
Stock Market ◽  
Markov Model ◽  
Financial Markets ◽  
Hidden Markov Model ◽  
Hidden Markov ◽  
Investor Sentiment ◽  
Market Returns ◽  
Stock Market Returns ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this paper is to evaluate the capability of the hidden Markov model using Googling investors’ sentiments to predict the dynamics of Islamic indexes’ returns in the Middle East and North Africa (MENA) financial markets from 2004 to 2018. Design/methodology/approach The authors propose a hidden Markov model based on the transition matrix to apprehend the relationship between investor’s sentiment and Islamic index returns. The proposed model facilitates capturing the uncertainties in Islamic market indexes and the possible effects of the dynamics of Islamic market on the persistence of these regimes or States. Findings The bearish state is the most persistent sentiment with the longest duration for all the MENA Islamic markets except for Jordan, Morocco and Qatar. In addition, the obtained results indicate that the effect of sentiment on predicting the future Islamic index returns is conditional on the MENA States. Besides, the estimated mean returns for each state indicates that the bullish and calm states are ideal for investing in Islamic indexes of Bahrain, Oman, Morocco, Kuwait, Saudi Arabia and United Arab Emirates. However, only the bullish state is ideal for investing Islamic indexes of Jordan, Egypt and Qatar. Research limitations/implications This paper has used data at a monthly frequency that can explain only short-term dynamics between Googling investor’s sentiment and the MENA Islamic stock market returns. Moreover, this work can be done on the stock markets while taking into account the specificity of each activity sector. Practical implications In fact, the findings of this paper are helpful for academics, analysts and practitioners, and more specifically for the Islamic MENA financial investors. Moreover, this study provides useful insights not only into the duration of the relationship between the indexes’ returns and the investors’ sentiments in the five states but also into the transition probabilities which have implications for how investors could be guided in their choice of future investment in a portfolio with Islamic indexes. Findings of this paper are important and valuable for policy-makers and investors. Thus, predicting the effect of Googling investors’ sentiment on the MENA Islamic stock market dynamics is important for portfolio diversification by domestic and international investors. Moreover, the results of this paper gave new insights into financial analysts about the dynamic relationship between Googling investors’ sentiment and Islamic stock market returns across market regimes. Therefore, the findings of this study might be useful for investors as they help them capture the unobservable dynamics of the changes in the investors’ sentiment regimes in the MENA financial markets to make successful investment decisions. Originality/value To the best of the authors’ knowledge, this paper is the first to use the hidden Markov model to examine changes in the Islamic index return dynamics across five market sentiment states, namely the depressed sentiment (S1), the bullish sentiment (S2), the bearish sentiment (S3), the calm sentiment (S4) and the bubble sentiment (S5).

Volatility–Volume Relationships Among Types of Traders Considering the Investment Limitation to Foreign Investors

2006 ◽  
Vol 09 (04) ◽  
pp. 575-596 ◽  
Author(s):  
Ching-Mann Huang ◽  
Tsai-Yin Lin ◽  
Chih-Hsien Yu ◽  
Si-Ying Hoe
Keyword(s):  
Stock Market ◽  
Institutional Investors ◽  
Trading Volume ◽  
Individual Investors ◽  
Volume Data ◽  
Foreign Investors ◽  
Volume Relationship ◽  
Before And After ◽  
The Individual

This paper examines the volatility–volume relationship in Taiwan stock market, using volume data categorized by type of trader. We consider before and after our event period of lifting the investment restrictions for foreign investors. We partition trading volume into expected and unexpected volume and find that the unexpected volume shocks for individual investors are more important than the expected volume shocks in explaining volatility before lifting the investment restrictions for the foreign investors. We find that the positive volatility–volume relationship is driven by the individual investors even during the period of the lifting of investment restrictions for foreign investors. However, with respect to institutional investors, before the removal of investment restrictions for foreign investors, the unexpected volume of trading of the domestic dealers exhibit positive volatility–volume relationship. Further, after the removal of investment restrictions, the unexpected volume of the foreign investors has a positive volatility–volume relationship.

Impact of behavioral factors on investors’ financial decisions: case of the Egyptian stock market

2019 ◽  
Vol 12 (1) ◽  
pp. 30-55 ◽  
Author(s):  
Noura Metawa ◽  
M. Kabir Hassan ◽  
Saad Metawa ◽  
M. Faisal Safa
Keyword(s):  
Stock Market ◽  
Behavioral Finance ◽  
Investor Sentiment ◽  
Investment Decisions ◽  
Demographic Characteristics ◽  
Individual Investors ◽  
Herd Behavior ◽  
Behavioral Factors ◽  
Content Type ◽  
Positive Effects

Purpose This paper aims to investigate the relationship between investors’ demographic characteristics (age, gender, education level and experience) and their investment decisions through behavioral factors (sentiment, overconfidence, overreaction and underreaction and herd behavior) as mediator variables in the Egyptian stock market. Design/methodology/approach This paper collects data from a structured questionnaire survey carried out among 384 local Egyptian, foreign, institutional and individual investors. This paper used a partial multiple regression method to analyze the effect of investors’ demographic characteristics on investment decisions through behavioral factors as the mediator variable. Findings Investor sentiment, overreaction and underreaction, overconfidence and herd behavior significantly affect investment decisions. Also, age, gender and the level of education have significant positive effects on investment decisions by investors. Experience does not play a significant role in investment decisions, but as investors gain experience, they tend to overlook the emotional factors. Practical implications The findings of this paper would help to understand common behavioral patterns of investors and indicate a path toward the growth of the Egyptian stock market. Originality/value There is a lack of research in behavioral finance covering Middle East and North African markets. This paper attempts to fulfill the gap by analyzing behavioral factors in the Egyptian market.

scholarly journals Islamic calendar anomalies: Pakistani practitioners’ perspective

2018 ◽  
Vol 10 (1) ◽  
pp. 71-84
Author(s):  
Anwar Halari ◽  
Christine Helliar ◽  
David M. Power ◽  
Nongnuch Tantisantiwong
Keyword(s):  
Stock Market ◽  
Investor Sentiment ◽  
Secondary Data ◽  
Individual Investors ◽  
Structured Interviews ◽  
Content Type ◽  
Net Worth ◽  
Share Prices ◽  
Market Participants ◽  
Calendar Anomalies

Purpose Studies on Islamic calendar anomalies in financial markets tend to apply quantitative analysis to historic share prices. Surprisingly, there is a lack of research investigating whether the participants of such markets are aware of these anomalies and whether these anomalies affect their investment practice. Or is it a case that these practitioners are completely unaware of the anomalies present in these markets and are missing out on profitable opportunities? The purpose of this paper is to analyse the views of influential participants within the Pakistani Stock Market. Design/methodology/approach The study documents the findings for 19 face-to-face semi-structured interviews conducted with brokers, regulators and high-net-worth individual investors in Karachi. Findings The paper’s major findings indicate that the participants believed that anomalies were present in the stock market and market participants were actively attempting to exploit these anomalies for abnormal gains. Interviewees suggested that predictable patterns can be identified in certain Islamic months (Muharram, Safar, Ramadan and Zil Hajj). The most common pattern highlighted by the interviews related to the month of Ramadan. Furthermore, interviewees mentioned the influence of the “Memon” community in the Pakistani Stock Market. Respondents also suggested that investor sentiment played an important role in influencing the stock market prices and trading patterns. Originality/value Because all the prior studies investigating Islamic calendar anomalies in Muslim-majority countries adopted quantitative method using secondary data, the current investigation is of particular value, as it focuses on the qualitative analyses and reports the views of market participants. This allows to fully explore the topic under investigation and to draw robust conclusions.

scholarly journals Implementation of Fibonacci Retracements and Exponential Moving Average (EMA) Trading Strategy in Indonesia Stock Exchange

2021 ◽  
Vol 6 (4) ◽  
pp. 402-408
Author(s):  
Lusindah Lusindah ◽  
Erman Sumirat
Keyword(s):  
Stock Market ◽  
Stock Price ◽  
Stock Exchange ◽  
Moving Average ◽  
Time Frame ◽  
Trading Strategy ◽  
Individual Investors ◽  
Individual Investor ◽  
Back Testing ◽  
The Individual

Based on KSEI statistic data on March 2021, IDX individual stock market investor is increasing 199% compared to 2018 becoming 4,848,954 number of investors. 56.9% population of the individual investor is having ages that less than 30 years. In the period where IDX was bullish in November 2020 - January 2021, there is a phenomenon where stocks influencers appeared in social media and impacted to the stock price movement after the announcement is done by the influencer. In contrary, during bearish and sideways condition, those influencers were gone and changed with bad news that went viral where many individual investors are lost their capital in IDX. They lose money since they are gambling in the stock market without any analysis and no establishment of trading plan. This research is aimed as a strategy to individual investors in IDX to implement trading strategy based on Fibonacci retracements and projections, EMA lines, trendlines, stochastic, and volume. Back testing is conducted in IDX SMC Liquid index constituents during January 2018 until December 2020 period. By implementing this trading strategy, return generated is 164% for 3 years trading time frame. Author also found that this trading strategy is effective in bullish trend condition especially for individual investors that have long position.

scholarly journals Optimism in Financial Markets: Stock Market Returns and Investor Sentiments

2019 ◽  
Vol 12 (2) ◽  
pp. 85 ◽  
Author(s):  
Chiara Limongi Concetto ◽  
Francesco Ravazzolo
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Spillover Effect ◽  
Investor Sentiment ◽  
European Market ◽  
Market Returns ◽  
Stock Market Returns ◽  
Investor Sentiments ◽  
The U.S

This paper investigates how investor sentiment affects stock market returns and evaluates the predictability power of sentiment indices on U.S. and EU stock market returns. As regards the American example, evidence shows that investor sentiment indices have an economic and statistical predictability power on stock market returns. Concerning the European market instead, investigation provides weak results. Moreover, comparing the two markets, where investor sentiment of U.S. market tries to predict the European stock market returns, and vice versa, the analyses indicate a spillover effect from the U.S. to Europe.

Impact of investor sentiment on decision-making in Indian stock market: an empirical analysis

2019 ◽  
Vol 17 (1) ◽  
pp. 66-83 ◽  
Author(s):  
Haritha P.H. ◽  
Rashmi Uchil
Keyword(s):  
Decision Making ◽  
Social Interaction ◽  
Investment Decision ◽  
Investor Sentiment ◽  
Individual Investors ◽  
Content Type ◽  
Market Effect ◽  
Factors Influencing ◽  
The Individual ◽  
The Relationship

Purpose The purpose of this paper is to analyze the relationship between the factors influencing investors sentiment and investment decision-making (DM) of the individual investors. This paper proposes a unique conceptual framework that incorporates the herding, market and awareness factors that are leading to investor sentiment (IS) and decision-making process of the individual investors. Design/methodology/approach This study has conducted a questionnaire-based survey to collect data from 875 individual investors through the convenience sampling method. Structural equation modeling was used to evaluate the relationship between factors, namely, market effect, herd behavior, media, social interaction and advocate recommendation that influences IS and DM. Findings The present study found that market effect and herding are the most significantly influencing factors of investors sentiment. Among the sources of awareness, the internet has the lowest influence when compared to media, social interaction and advocate recommendation. Practical implications This study will help individual investors to avoid the problems faced while making an investment decision. The study could help investors to select a suitable investment aid and avoid repeating expensive errors, which arise due to investors’ sentiment. It is recommended to increase the awareness regarding investors’ sentiment among individuals, so as to increase their understanding about the financial settings and to make them confident while investing. The present study also sheds light upon the behavior of Indian individual investors so that policymakers can take appropriate measures to provide the proper guidance. Policymakers can conduct awareness campaigns to increase investors’ knowledge on the market condition and to enhance proper investment DM among them. Originality/value To best of the authors’ knowledge, previous studies have focused on limited factors at a time. The present study has investigated how factors influencing investors sentiment, namely, market factors (MF), herding as well as awareness would influence investment DM among individual investors in India. The influence of these factors has never been studied simultaneously in the context of Indian individual investors’ DM.

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