Effect of Investor Sentiment on Future Returns in the Nigerian Stock Market
Study investigated the effect of investor sentiment on future returns in the Nigerian stock market for a period covering first quarter of 2008 to fourth quarter of 2015.The OLS regression and granger causality techniques were employed for data analyses. The results showed that 1 investor sentiment has a significant positive effect on stock market returns even after control for fundamentals such as Industrial production index, consumer price index and Treasury bill rate 2 there is a uni directional causality that runs from change in investor sentiment CCI to stock market returns Rm . Derived finding showed that the inclusion of fundamentals increased the explanatory power of investor sentiment from 3.96 to 33.05 , though at both level, investor sentiment CCI has low explanatory power on stock market returns. The study posits existence of a dynamic relationship between investor sentiment and the behaviour of stock future returns in Nigeria such that higher sentiment concurrently leads to higher stock prices.
Investor sentiment, Nigerian stock market, stock returns, consumer confidence index, noise trading
Udoka Bernard Alajekwu* | Cyprian Okey Okoro | Dr. Michael Chukwumee Obialor | Prof. N. S. Ibenta