Investor sentiment and price momentum in emerging markets

Abstract

This thesis explores the effect of investor sentiment on momentum profits in emerging markets, highlighting the significant role of retail investors in driving sentiment-driven market behavior. First, the results indicate that investor sentiment has a significantly positive effect on momentum profits. Short-term sentiment measures exhibit a stronger impact on momentum profits compared to longer-term measures. Second, the effect of sentiment on momentum profits is more pronounced during periods of optimism in emerging markets compared to developed markets. Third, within emerging markets, the effect of sentiment on momentum profits is found to be stronger in portfolios consisting of smaller or younger firms. Leveraging these insights, a sentiment-adjusted momentum strategy is proposed and demonstrated to be superior to traditional momentum strategies in terms of performance.

Date of Award	2024
Original language	English
Awarding Institution	The Hong Kong University of Science and Technology
Supervisor	Junlong FENG (Supervisor)