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Investor Sentiment Dynamics and Returns in Stock Market in Saudi Arabia |
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PP: 863-871 |
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doi:10.18576/amis/190412
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Author(s) |
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Abdullah Alawajee,
Mohd Tahir Ismail,
S. Alwadi,
Omar Jawabreh,
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Abstract |
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| The study will utilize the Autoregressive Distributed (ARDL) models to cover the necessary samples from September 2009 to 2022, ensuring a reliable conclusion. The stock exchange in Saudi Arabia provides price and supply data for stock ; data on money creation (F1). The findings shed light on the complex interplay of factors influencing market dynamics in Saudi Arabia. A multitude of factors, including ”investor sentiment,” ”economic indicators,” and global economic policy uncertainty, influence the Saudi stock markets. Understanding the symmetric and asymmetric effects of these factors on market returns is crucial for investors, policymakers, and stakeholders. Previous studies have highlighted the importance of investor sentiment in predicting market movements, yet the specific dynamics in the Saudi market, characterized by its unique economic structure and investor base, warrant further investigation. A comprehensive set of pre- and post-estimation, and Johansen integration , Principal Component (PCA) constructs the sentiment index from a range of economic, financial, and global variables. The results indicate that specifically, the sentiment from two periods ago positively influences current. Additionally, money supply and consumer confidence index have varying degrees of influence on market returns, with specific lagged effects observed for the industrial production index. The study pioneers in identifying the asymmetric influence of investor sentiment on real estate returns. While most existing theories assume a symmetric response to positive and negative sentiment shifts, this study introduces a new layer of complexity to market behavior theory. Finally, the dynamic asymmetric multiplier’s long-term symmetry adds another layer to our understanding of market efficiency and adaptability. While the market may show asymmetric responses in the short run, the eventual symmetry in long-term adjustment patterns implies a more complex adaptive system than previously assumed. Studies exploring adaptive market hypotheses and the effectiveness of long-term market equilibration processes can benefit from this novel finding. The findings underscore the complex, ARDL relationships between market returns and economic indicators in the Saudi market.
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