Individual Investors' Sentiment and Temporary Stock Price Pressure

• Published in: Journal of business finance & accounting Vol. 31; no. 5-6; pp. 823 - 836
• Main Authors: Chan, Siu Y., Fong, Wai-Ming
• Format: Journal Article
• Language: English
• Published: Oxford, UK; Malden, USA Blackwell Publishing Ltd/Inc 01.06.2004; Wiley Blackwell; Blackwell Publishing Ltd
• Series: Journal of Business Finance & Accounting
• Subjects: Accounting; Business studies; Finance; Forecasts; Hong Kong; individual investors' sentiment; Investment; Investments; Investors; Pressure; Stock exchange; Stock prices; Stocks; Studies; temporary stock price pressure; Hong Kong China; China
• ISSN: 0306-686X; 1468-5957
• DOI: 10.1111/j.0306-686X.2004.00558.x

Using data for the Hong Kong stock market, where individual investors’ sentiment is likely to be influential, this study finds that the publication of individual investors’ sentiment temporarily affects stock prices regardless of the publication's incompetence in predicting stock returns. Specifically, when the publication reports that more and more investors are optimistic, the return on the day just after the publication is higher and the return several days later is lower. Furthermore, the results are strongest for small stocks, and weakest for large stocks. It seems that some individual investors buy (sell) stocks when others, as reported by the publication, are optimistic (pessimistic), and that the trading causes temporary buying (selling) pressure initially and price reversals afterwards.