The role of behavioral tendencies (sentiment) of investors in valuation of the company

Document Type : Research Paper

Authors

1 Assistant Professor of Accounting, University of Ferdowsi of Mashhad, Mashhad, Iran.

2 Associate Professor of Accounting, Faculty of Administrative and Economic science, University of Ferdowsi of Mashhad, Iran.

3 Ph.D. Student of Accounting, University of Ferdowsi of Mashhad, Mashhad, Iran.

Abstract

The purpose of this article is to examine the impact of sentiments and behavioral tendencies of investors on pricing of capital assets. For this purpose, the adjusted three-factor model of Fama and French has been used based on the evaluation criteria for emotions of the investor. This study has been done based on the information released by listed companies in Tehran Stock Exchange, in the period between 1389 and 1394, with the selected sample consisting of 141 companies.
Results of testing hypothesis show an increase in the explanatory factor of pricing model of capital assets as well as each of its components by adding emotion indexes. Investor emotions indices used in this study includes financial turnover of shares in the market, ratio of days with uptrend to days with downtrend of the stock price and the ratio of spending stock dividend profit. The first and second indicators of investor emotions has a positive and significant relationship with the returns of stock portfolios and regarding the third index, no significant relationship was observed in the model; while, positive emotions compared to negative emotions have a distinct impact on asset pricing. Also, the first and second indicators of emotions impact the market factor of Fama and French model, all three indicators of emotions impact the factor of size of the company in Fama and French model and also the second and third indicators of emotions impact the factor of ratio of book value to market value of Fama and French model.

Keywords

References

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History

  • Receive Date: 17 July 2017
  • Revise Date: 17 September 2017
  • Accept Date: 11 December 2017

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