Investorss Sentiment and Stock Market Return in the Saudi Stock Market

Abstract

The objective of this paper is to conduct an analysis on a very significant behavioral finance issue discussed in its recent studies; namely, the relationship between investors’ sentiment and the returns of stock markets. This study will be conducted in the context of the Saudi stock exchange (SSE), that is the largest market in the Gulf area, and cover the period of 2010-2015. In the literature of investors’ sentiment, a number of proxies to measure investors’ sentiment are found, for the purpose of this research, we will employ the stock market liquidity or volume as a proxy of investors’ sentiment. Our results find a positive relationship between aggregate market volume as a proxy for investor sentiment and aggregate market return. This finding is in line with the previous work's results that test the association between investors' sentiment with various proxies and market returns.