Technological advancements and noise trading: A case of investors’ sentiments at the Pakistan Stock Exchange

Abstract

This study uses data from the KSE-100 stock index from 2009 to 2021 to investigate the influence of technological advancements, investors' sentiments, and behavioral factors on stock market inefficiency. The study employs a threshold regression model to distinguish between different thresholds of these factors and a Wald test is used to determine the significance of the variances among thresholds. The results indicate that technological advancements, investors' sentiments, and behavioral factors significantly affect the predictability of returns in the KSE-100 index. This study is unique in the context of Pakistan and provides a comprehensive framework for understanding stock market operations. The findings have practical applications for individuals, researchers, managers, institutions, and policymakers seeking to better understand the impact of technology, society, and behavioral biases on stock markets. Furthermore, this study provides unique insights into addressing the issue of market inefficiency by identifying the factors responsible for such behavior.