The affect of investor sentiment on the return and risk of financial assets (A comparative analytical study)

Abstract

The study deals with the impact of investor emotion with two Stock markets in the Middle East, which are the Saudi Stock Exchange (Tadawul) and the Iraqi financial market. The research covered three sectors for each market (banking sector, industry sector, telecommunications sector) using financial variables (trading volume, market value, turnover rate) for the period from 2013-2018 for monthly data. The results showed that investor emotion has an of importance impact on returns and varies in intensity across the stock market and according to the available information and the type of investors. As the descriptive analysis of the markets was explained and showed the dominance of the Saudi market, the trends were measured for each sector using the multiple regression equation for the three indicators, and there was a variation in the impact of investor sentiments from one market to another. As the study showed the predominance of negative sentiment in the Iraqi stock market and positive sentiment in the Saudi financial market. The amount of risk (beta) was shown by using the simple regression equation between sector returns and total rate returns, and the solution showed a huge risk in the Saudi market (Tadawul) as well as the lowest risk Iraqi financial market.