Investor Sentiment and its Effect on Stock Market Performance: Evidence from Pakistan

Abstract

This study examines the effect of investor sentiment on Pakistan’s stock market and elaborates how the attitude and the behavior of investors as a whole influence the market. Using both quantitative and qualitative methods of research including sentiment analysis, the study seeks to determine the relationship between investor sentiment and the stock market in Pakistan. The objective of the study is to analyze the data of sentiment indices as well as the market data and try to establish trends and other relationships which will help to show how changes in the investor sentiment affect the prices of stocks and volumes of trade. The results show that investors’ sentiment is one of the factors affecting the volatility of the market, where on one hand, the high market and investor sentiment results in high price movements while low sentiment result to low price movements in the market.