Investors’ sentiment and stock trading in the Nigerian capital market

Abstract

This study examined the relationship between investors sentiment and stock trading for thirty listed firms in Nigeria, covering periods of 2015-2019. This study comes at a time when behavioral economics gains larger interest in investment decision. This school of thought dismisses the assertion of neoclassical economics that markets are efficient;, hence they cannot be beaten by consistently earning abnormal profits. Two research objectives were formulated for the study, which borders on determining whether investors’ sentiment affects stock trading of corporate firms in Nigeria, and whether investors’ sentiment affect trading stocks for industries in Nigeria differently. Data for the study were sourced from banking, manufacturing, and insurance sectors of the Nigerian Stock Exchange. Fixed effect regression was used to analyse the effect of investors’ sentiment on stock trading. The Analysis of Covariance was used to examine whether investors’ sentiment differently affect trading stocks for different sector in Nigeria. The results obtained showed that investors’ sentiment exerts significant impact on stock trading of the firms investigated, and it is used to affect trading stocks for industries in Nigeria differently. The study recommends that investors should make use of fundamental analysis and technical analysis to trade stocks. Keywords: Behavioural economics, efficient market hypothesis, Investors’ sentiment, neoclassical economics, and stock trading.