Market sentiments and firm-level equity returns : panel evidence of Malaysia

Zulkefly, Abdul Karim and Fairul Shah Rizat, Muhamad Fahmi and Bakri, Abdul Karim and Mohamed Aseel, Shokr (2022) Market sentiments and firm-level equity returns : panel evidence of Malaysia. Economic Research-Ekonomska Istrazivanja. pp. 1-20. ISSN 1331-677X

[img] PDF
Market sentiments.pdf

Download (538kB)
Official URL:


This study focuses on the impact of market sentiment on firmlevel equity returns in Malaysia by hypothesising that market sentiment is a relevant risk factor. Understanding how the market sentiment reflects the equity return is crucial to market participants managing their portfolio investment risks. In modelling for firm-level equity return determinants using augmented Fama and French (1992, 1996) three-factor model, this study used data from a sample of 608 publicly listed firms for 2010–2019 and the dynamic panel GMM estimation technique. The findings revealed that market sentiment indices, namely Business Conditions Index (BCI) and Consumer Sentiments Index (CSI), strongly and positively influenced firms equity returns. Excellent market sentiment encouraged a bullish strategy, increasing share prices and, consequently, stock returns. In addition to market sentiment, other related variables, namely domestic market returns, international market returns, small minus big (SMB), high minus low (HML), and firms’ liquidity ratio, are also found to be statistically significant in influencing firms equity returns. The policy implication provides a vital strategy to market participants, particularly fund managers and investors, to accordingly manage their risks and returns on their portfolio investment.

Item Type: Article
Uncontrolled Keywords: Behavioural finance; emerging market; Fama-French multifactor model; firm’s stock returns; investor sentiment; MIER; short panel; system GMM.
Subjects: H Social Sciences > HG Finance
Divisions: Academic Faculties, Institutes and Centres > Faculty of Economics and Business
Faculties, Institutes, Centres > Faculty of Economics and Business
Depositing User: Gani
Date Deposited: 14 Mar 2022 03:33
Last Modified: 16 Mar 2022 06:29

Actions (For repository members only: login required)

View Item View Item