INVESTOR SENTIMENT EFFECT ON STOCK RETURNS IN SAUDI ARABIA STOCK MARKET

Abstract

Financial knowledge has been noticeably established over the last decades, and many investigators have understood that stock price fluctuations are not only rational, but are largely related to investor sentiment.  This work was done to study the effect of investor sentiment on stock returns in Saudi Arabia market. For this work, the data were used is the Saudi stock market return for the study period of 2016-2018 for 20 different companies registered in the stock market.  This study has only used one sentiment indicator (Consumer Confidence Index - CCI) in measuring the effect of investor sentiment on stock returns. The findings of this study have shown that investor sentiments have a significant effect on stock market returns in Saudi Arabia. Furthermore, the results have also shown that Industrial Production Index (IPI) has an insignificant positive effect while Treasury Bill Rate (TBR) and Consumer Price Index (CPI) have a positive relationship with stock market returns. The results show that sentiment is an important variable in stock prices on the Saudi market. This effect is linked to the characteristics of the stock, in particular those that are careful to make the stock more disposed to the influence of the investor's sentiment.