Investor Trading Behavior and Investors Sentiment and the Tone of Board Activity Report

Objective: The stock exchange with its operational mechanism is a suitable place in the financial and economic structure of a country and can work effectively in the direction of the development and expansion of the country's liquidity resources. Many people consider the stock market to be related to behaviors such as greed, crises and assumptions. Behavioral finance theories challenge efficient market hypotheses by highlighting the important role of Investors' sentiment and psychological states in financial decisions. The emotional tendency of investors, as an effective factor on the behavior of investors, cause changes in the capital market and thus affects the volume of transactions and the price of the stock market. Another factor that effects on the decision-making and investors behavior is the published reports on the performance and financial status of companies, such as the board activity report. These reports contain textual and quantitative information that textual information contains a larger volume of the reports than quantitative information. One of the most important features of textual information is its tone, which in accounting it refers to the amount of positive and negative text in reports. The tone of the reports published by managers is determined by the use of vocabulary and the combination of positive and negative words, which shows the way that management is intended to inform outsiders. Therefore, the textual information used by management can be effective in the type of decision made by investors.

Methods: The method of the present study is applied in terms of purpose and in terms of classification according to method is descriptive-correlational and the data analysis method is regression analysis and panel data method. The statistical sample of the research is the Tehran Stock Exchange companies (151 companies; 1963 year-company) during the years 2009 to 2021. Principal component analysis (PCA) method is used to measure the investors' sentiments. Also, the tone of board activity report is measured through text mining and using MAXQDA 2021.

Results: The results show that there is a positive and significant relationship between investor Sentiment and their trading behavior. Also, a negative and significant relationship was observed between the tone of board activity report and the trading behavior of investors.



Conclusion: investors' sentiments create a belief which causes them to react based on the same belief and also, behave differently based on this belief and these different behaviors, in total, cause a change in the price trend in the stocks market. The type of tone that managers use to disclose the textual information of the board activity report affects the decision-making of the users of this report and causes them to show a behavior in the stocks market that reduces the abnormal volume of transactions in total. Considering that no research has been done to study the effect of the tone of board activity report on the behavior of investors, the findings of this research can greatly help to identify the effects of the tone used by the management in disclosing the textual information of this type and also to understand the effect of investors' emotions on their trading behavior.

Conclusion: investors' sentiments create a belief which causes them to react based on the same belief and also, behave differently based on this belief and these different behaviors, in total, cause a change in the price trend in the stocks market. The type of tone that managers use to disclose the textual information of the board activity report affects the decision-making of the users of this report and causes them to show a behavior in the stocks market that reduces the abnormal volume of transactions in total. Considering that no research has been done to study the effect of the tone of board activity report on the behavior of investors, the findings of this research can greatly help to identify the effects of the tone used by the management in disclosing the textual information of this type and also to understand the effect of investors' emotions on their trading behavior.



Conclusion: investors' sentiments create a belief which causes them to react based on the same belief and also, behave differently based on this belief and these different behaviors, in total, cause a change in the price trend in the stocks market. The type of tone that managers use to disclose the textual information of the board activity report affects the decision-making of the users of this report and causes them to show a behavior in the stocks market that reduces the abnormal volume of transactions in total. Considering that no research has been done to study the effect of the tone of board activity report on the behavior of investors, the findings of this research can greatly help to identify the effects of the tone used by the management in disclosing the textual information of this type and also to understand the effect of investors' emotions on their trading behavior.