A Model of Investor Sentiment Based on Grounded Theory Approach

Subject Areas : Econometrics and Financial Applications of other Theories (Stochastic Processes, (Stochastic) Partial Differential Equations, Dynamical Systems)

Akram  Davoudi ¹ (Department of Accounting, Aliabad Katoul Branch, Islamic Azad University, Aliabad Katoul, Iran)
Ali  Khozein ² (Department of Accounting, Aliabad Katoul Branch, Islamic Azad University, Aliabad Katoul, Iran)
Arash  Naderian ³ (Department of Accounting, Aliabad Katoul Branch, Islamic Azad University, Aliabad Katoul, Iran)

Received: 2021-12-26 Accepted : 2022-05-10 Published : 2023-09-01

Keywords: Behavioral Finance, Investor Sentiment, Grounded Theory, Investor Expectations,

Abstract :

Investor expectations future economic processes are among the crucial factors affecting their decisions. The expectations seem to play a specific role since they are unsupervised variables capable of forming observable economic phenomena. Psychological factors influence investor expectations and corporate market value. Investor sentiments was modelled with an emphasis on psychological factors based on the Grounded Theory (GT). This applied and mixed-methods at its first and second stages. The statistical population comprised 13 experts, senior managers of investment companies, and university professors. The participants were selected through purposive and snowball sampling and the process was continued until theoretical saturation. The data were collected via semi-structured interviews coded via Atlas.ta.8 software. The research data were analysed using an open coding method. The results of the research were presented in 46 categories and 6 key dimensions.

References:

[1] Alizada, Z., and Clarin, O., The Impact of Loss Aversion Bias on Herding Behavior of Young Swedish Retail Investors: A Behavioral Perspective on Young Swedish Retail Investors' Decision Making in the Stock Market, Review of Accounting and Finance, Bachelor Thesis in Business Administration, 2018, (in Persian).

 

[2] Baker, M., and Wurgler, J., Investor sentiment in the stock market, The Journal of Economic Perspectives, 2007, 21(2), P. 129- 152. Doi: 10.1257/jep.21.2.129

 

[3] Bayat, M., and Ghaderi, N., Reference prices and the effects of mental accounting on investment performance, Accounting Knowledge and Auditing Management, 2016, 19(5), P. 89- 104, (in Persian).

 

[4] Blau Benjamin, M., Price Clustering and Investor Sentiment, Journal of Behavioral Finance, 2019, 20(1), P.19- 30. Doi: 10.1080/15427560.2018.1431887

 

[5] Brown, G.W., Cliff, M.T., Investor sentiment and the near-term stock market, Journal of Empirical Finance, 2004, 11(1), P. 1- 27. Doi: 10.1016/j.jempfin.2002.12.001

 

[6] Caglar, C.E., Ergün, Z.C., and Durukan, M.B., The causal linkages between investor sentiment and excess returns on Borsa Istanbul, Borsa Istanbul Review, 2020, 20(3), P. 214-223. Doi: 10.1016/j.bir.2020.02.001

 

[7] Aliakbarpoor, Z., Izadikhah, M. Evaluation and ranking DMUs in the presence of both undesirable and ordinal factors in data envelopment analysis. Int. J. Autom. Comput. 2012, 9, P. 609–615. Doi: 10.1007/s11633-012-0686-5

 

[8] Cornell, B., Landsman, W., and Stubben, S., Accounting information, investor sentiment and market pricing, SSRN Working Paper. No. 2447695, 2014.

 

[9] Dadras, K., Toluei Ashlaghi, A., and Radfar, A., Role of Behavioral Finance in Understanding Individual Investor's Behavior (A Review of Empirical Evidence from Tehran Stock Exchange), Investment Knowledge, 2018, 3(10), P. 219- 203, (in Persian).

 

[10] Danaeifard, H., and Emami, S.M., Strategies of Qualitative Research: Reflection on the Ground Theory, Strategic Management Thought, 2007, 1(2), P. 69- 76, (in Persian).

 

[11] Danaeifard, H., and Eslami, A., Applicaiton of Strategies of the Ground Theory in Practice, Generating the Theory of Organizational Behavior, Tehran, Imam Sadegh University Publication, 2011, (in Persian).

 

[12] Elgebeily, E., Guermat, C., and Vendrame, V., Managerial optimism and investment decision in the UK, Journal of Behavioral and Experimental Finance, 2021, 31, P. 1-35.

 

[13] Elhaei sahar, M., Hejazi, R., Salehi, A., Moltafet, H., Stock Price Momentum Modelling: A Grounded Theory Approach, Advances in Mathematical Finance and Applications, 2020, 5(2), P.167-181. Doi: 10.22034/ AMFA.2020.1882300.1324

 

[14] Grundy, B.D., and Li, H., Investor sentiment, executive compensation and corporate investment, Journal of Banking & Finance, 2010, 34(10), P. 2439-2449.

 

[15] Holger, A.R., and Li, H., The Disposition Effect and loss Aversion: Do Gender Differences Matter? Economics Letters, 2014, 123(1), P. 33-36.

 

[16] Hribar, P., and McInnis, J., Investor sentiment and analyst’s earnings forecast errors, Management Science, 2012, 58(2), P. 293-307.

 

[17] Hsu, Y.L., and Chow, E.H., The House Money Effect on Investment Risk Taking: Evidence from Taiwan, Pacific-Basin Finance Journal, 2013, 21(1), P. 1102- 1115.

 

[18] Hsu, Y. L., Lee, C. H., Kreng, V. B., The application of Fuzzy Delphi Method and Fuzzy AHP in lubricant regenerative technology selection, Expert Systems with Applications, 2010, 37, P.419-425.

 

[19] Izadikhah, M., Farzipoor Saen, R. Solving voting system by data envelopment analysis for assessing sustainability of suppliers. Group Decis Negot, 2019, 28, P. 641–669. Doi: 10.1007/s10726-019-09616-7

 

[20] Jonsson, S., Söderberg, I., and Wilhelmsson, M., An investigation of the impact of financial literacy, risk attitude, and saving motives on the attenuation of mutual fund investors’ disposition bias, Managerial Finance, 2017, 43(3), P. 282-298.

 

[21] Kartini, K., and Nahda, K., (2021). Behavioral Biases on Investment Decision: A Case Study in Indonesia, Journal of Asian Finance, Economics and Business, 8(3), P. 1231–1240.

 

[22] Karapinar, E., Mosai, S., Teherinejad, F., A Corporate Perspective on Effect of Asymmetric Verifiability on Investors’ Expectation Differences, Advances in Mathematical Finance and Applications, 2019, 4(4), P.1-18.

Doi: 10.22034/AMFA.2019.1869165.1227.

 

[23] Khalili Iraqi, M., Sardar, S., and Vafadar, E., Influence of Investor’s Emotions on Skewness Perferences and Asset Price, Paper presented at 1^th National Conference on the Role of Accounting, Economy and Management, 2017, (in Persian).

 

[24] Kim, J.S., Kim, D.H., and Seo, S.W., Investor sentiment and return predictability of the option to stock volume ratio, Financial Management, 2016, 46(3), P. 767-796.

 

[25] Lan, Y., Huang, Y., and Yan, C., Investor sentiment and stock price: Empirical evidence from Chinese SEOs, Economic Modelling, 2020, 94, P. 703–714.

 

[26] Lindner, F., Kirchler, M., Rosenkranz, S., and Weitzel, U., Social Motives and Risk-Taking in Investment Decisions, Journal of Economic Dynamics and Control, 2021, 127, P. 1-16. Doi: 10.2139/ssrn.2447695

 

[27] Lutfur, R., and Shamsuddin, A., Investor sentiment and stock price: Empirical evidence from Chinese SEOs, Economic Modelling, 2019, 55, P. 46-62. Doi: 10.1016/j.econmod.2020.02.012

 

[28] Mehrani, K., and Madachi, M., The Test of the Effect of Investor Trading Behavior and Investors` Sentiment on Excess Return in Tehran Stock Exchange, Journal of Financial Management Strategy, 2018, 6(21), P. 131- 158, (in Persian).

 

[29] Mohammadpour, A., Innovation Experience (Study of Change and Development in Horaman on the basis of Ground Theory, Tehran, Sociologists Publications, 2013, (in Persian).

 

[30] Nikoo Maram, H., Sadi, A., and Mehrani, K., Testing Investment Strategies Based on Behavioral Finance, Journal of Investment Knowledge, 2016, 5(20), P. 39- 66, (in Persian).

 

[31] Pompian, M., Behavioral Finance and Investor Types: Managing Behavior to Make Better Investment Decisions, Hoboken: John Wiley & Sons, Inc, 2012, 46(3), P. 8-42.

 

[32] Ranjbar, H., et al., Sampling in Qualitative Research: Manual for the Start, AJA University of Medical Sciences is the medical school of Islamic Republic of Iran Army, 2007, 10, P. 238- 250, (in Persian).

 

[33] Raeespoor, A., Tadbiri, S., Afsharnejad, A., Sadeh, E., Effective Strategies for the Establishment of Integration Model for Succession Planning and Career Progression Path of Iranian Azad Universities Administrators, Advances in Mathematical Finance and Applications, 2018, 3(2), P.97-112. Doi: 10.22034/AMFA.2018.540834

 

[35] Shapira, Z., and Venezia, I., Patterns of behavior of professionally managed and independent investors, Journal of Banking and Finance, 2001, 25(8), P. 1573-1587. Doi: 10.1016/S0378-4266(00)00139-4

 

[36] Soroushyar, A., The Investigation of the Role of Momentum and Investors' Sentiments on the Herding Behavior in Tehran Stock Exchange, Journal of Investment Knowledge, 2016, 5(18), P. 147- 159, (in Persian).

 

[37] Strauss, A.L., and Corbin, J., Basics of Qualitative Research: Techniques and Procedures for Developing Grounded Theory, Trans: Ebrahim Afshar, Tehran, Nashr-e Ney, 2015.

 

[38] Subramanian, R.L., and Harper Joel, T., Cash flow volatility and investor sentiment, Managerial Finance, 2017, 43(24), P. 178-192. Doi:10.1108/MF-02-2016-0045

 

[39] Takamatsu, R.T., and Lopes Fávero, L.P., Financial indicators, informational environment of emerging markets and stock returns, Emerging markets and stock returns, 2019, 54(3), P. 253-268.

 

[40] Tehrani, R, and Khoshnoud, M., dentifying and Ranking Influential Groups on individual investor’s decision making regarding stock trade in Tehran stock exchange, Journal of Organizational Culture Management, 2005, 7(28), P. 83- 101, (in Persian).

 

[41] Tzeng, G.-H., Teng, J.-Y., Transportation investment project selection with fuzzy multiobjectives. Transp.Plann. Technol, 1993, 17(2), P. 91–112. Doi: 10.1016/S0165-0114(96)00330-2

 

[42] Uygar, U., and TAS, O., The impacts of investor sentiment on different economic sectors: Evidence from Istanbul Stock Exchange, Borsa Istanbul Review, 2014, 14(4), P. 236-241.

 

[43] Walid, A., The trading patterns and performance of individual vis-à-vis institutional investors in the Qatar Exchange, Review of Accounting and Finance, 2014, 13(1), P. 24-42.

 

[44] Wu, Ch., Fang, W., Combining the Fuzzy Analytic Hierarchy Process and the Fuzzy Delphi Method for Developing Critical Competences of Electronic Commerce Professional Managers, Qual Quant, 2011, 45(4), 45, P.751-768. Doi: 10.1007/s11135-010-9425-6

 

[45] Zanjirdar, M., Kasbi, P., Madahi, Z., Investigating the effect of adjusted DuPont ratio and its components
on investor & quot; s decisions in short and long term, Management Science Letters, 2014, 4(3), P.591-596.
Doi: 10.5267/j.msl.2014.1.003

 

[46] Rahmani, A., Zanjirdar, M., Ghiabi, H. Effect of Peer Performance, Future Competitive Performance, and Factors of Correlation with Peer Companies on Manipulation of Abnormal Real Operations. Advances in Mathematical Finance and Applications, 2021, 6(1), P. 57-70. Doi: 10.22034/amfa.2020.1875478.1272