The influence of noise traders on the Vietnamese stock market
Main Article Content
Abstract
The study examines the impact of noise trading on stock returns. The investor sentiment index is constructed as a representative of noise trading. This index is extracted from two sources: social network Facebook and mainstream press. Based on data collected using the text language analysis method, the author tests a regression model to explain the impact of investor sentiment on the return rate of stocks on the stock market. Vietnamese securities. The result is that sentiment extracted from newspapers has a positive impact over the same period on profitability while sentiment extracted from social networks has no impact. Therefore, investors can use the press-based investor sentiment index as a tool in technical analysis when making decisions.
Article Details
Keywords
Sentiment, Behavioral finance, Stock returns, Noise trading, Individual investors.
References
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Alfano, S., Feuerriegel, S., & Neumann, D. (2020). Language sentiment in fundamental and noise trading: evidence from crude oil. Applied Economics, 52(49), 5343-5363.
Baker, M., & Wurgler, J. (2007). Investor sentiment in the stock market. The Journal
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Banz, R. W. (1981). The relationship between return and market value of common stocks. Journal of financial economics, 9(1), 3-18.
Barber, B. M., & Odean, T. (2008). All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors. The Review of Financial Studies, 21(2), 785–818.
Berardi, M. (2022). Uncertainty and sentiments in asset prices. Journal of Economic Behavior & Organization, 202, 498-516.
Black, F. (1986). Noise. The journal of finance, 41(3), 528-543.
Bukovina, J. (2016, 2016/09/01/). Social media big data and capital markets—An overview. Journal of Behavioral and Experimental Finance, 11, 18-26. https://doi.org/https://doi.org/10.1016/j.jbef.2016.06.002
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Chan, F., Durand, R. B., Khuu, J., & Smales, L. A. (2017). The validity of investor sentiment proxies. International Review of Finance, 17(3), 473-477.
Crain, M. A. (2011). A literature review of the size effect. Available at SSRN 1710076.
Cuong, P. K., Ngoc, T. T. B., Cong, B. T., & Chau, V. T. Q. (2019). Noise trader risk: evidence from vietnam stock market. Hue University Journal of Science: Economics and Development, 128(5C), 5–16-15–16.
Dow, J., & Gorton, G. (1997). Noise trading, delegated portfolio management, and economic welfare. Journal of Political Economy, 105(5), 1024-1050.
Dung, P. T. T., & Duyen, N. T. (2020). Comparing the explanatory ability of 3 asset pricing models: CAPM, Fama French 3 factors and Fama French 5 factors on the Vietnamese stock market.
Dunham, L. M., & Garcia, J. (2021). Measuring the effect of investor sentiment on financial distress. Managerial Finance, 47(12), 1834-1852. https://doi.org/10.1108/MF-02-2021-0056
Eierle, B., Klamer, S., & Muck, M. (2022). Does it really pay off for investors to consider information from social media? International Review of Financial Analysis, 81, 102074.
Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance, American Finance Association, , vol. 25(2), 383-417.
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Hagenau, M., Liebmann, M., & Neumann, D. (2013). Automated news reading: Stock price prediction based on financial news using context-capturing features. Decision support systems, 55(3), 685-697.
Hua, F., & Wang, J. (2018). How investor sentiment impacts financial decision-making behavior: From a cognitive neuroscience perspective. NeuroQuantology, 16(5).
Jazbec, M., Pàsztor, B., Faltings, F., Antulov-Fantulin, N., & Kolm, P. N. (2021). On the impact of publicly available news and information transfer to financial markets. Royal Society Open Science, 8(7), 202321.
Kamath, A., Shenoy, S., & Kumar, S. (2022). An overview of investor sentiment: Identifying themes, trends, and future direction through bibliometric analysis. Invest. Manag. Financ. Innov, 19, 229-242.
Karabulut, Y. (2013). Can facebook predict stock market activity? SSRN scholarly paper No. ID 2017099 Retrieved 20-8 from https://papers.ssrn.com/abstract=2017099
Khuu, J., Durand, R. B., & Smales, L. A. (2017). Investor Sentiment and Japanese Stock Returns. Available at SSRN 2906633.
Li, X., Xie, H., Chen, L., Wang, J., & Deng, X. (2014). News impact on stock price return via sentiment analysis. Knowledge-Based Systems, 69, 14-23.
Lintner, J. (1965). Security prices, risk, and maximal gains from diversification. Journal of Finance, 20(4), 587-615.
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Markowitz, H. (1952). Portfolio selection. Journal of Finance 7(1), 77-91.
Nguyen, C., Hoang, L., Shim, J., & Truong, P. (2020, 2020/04/01/). Internet search intensity, liquidity and returns in emerging markets. Research in International Business and Finance, 52, 101166. https://doi.org/https://doi.org/10.1016/j.ribaf.2019.101166
Nguyen, D., & Pham, M. (2018). Search-based sentiment and stock market reactions: an empirical evidence in Vietnam. Journal of Asian Finance, Economics and Business, 5(4), 45-56.
Nyakurukwa, K., & Seetharam, Y. (2023). Does online investor sentiment explain analyst recommendation changes? Evidence from an emerging market. Managerial Finance, ahead-of-print(ahead-of-print). https://doi.org/10.1108/MF-05-2022-0221
Phan, T. N. T., Bertrand, P., Phan, H. H., & Vo, X. V. (2023). The role of investor behavior in emerging stock markets: Evidence from Vietnam. The Quarterly Review of Economics and Finance.
Riabykh, A., Surzhko, D., Konovalikhin, M., & Koltcov, S. (2022). STTM: an efficient approach to estimating news impact on stock movement direction. PeerJ Computer Science, 8, e1156.
Sanders, D. R., Irwin, S. H., & Leuthold, R. M. (1997). Noise traders, market sentiment, and futures price behavior.
Schneider, M., & Nunez, M. (2024). A Decision Theoretic Foundation for Noise Traders and Correlated Speculation. Decision Analysis, 21(1), 4-22.
Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. The journal of finance, 19(3), 425-442.
Shleifer, A., & Summers, L. H. (1990). The noise trader approach to finance. Journal of Economic perspectives, 4(2), 19-33.
Siganos, A., Vagenas-Nanos, E., & Verwijmeren, P. (2014). Facebook's daily sentiment and international stock markets. Journal of Economic Behavior & Organization, 107, 730-743.
Siganos, A., Vagenas-Nanos, E., & Verwijmeren, P. (2017). Divergence of sentiment and stock market trading. Journal of Banking & Finance, 78, 130-141.
Simoes Vieira, E. (2011). Investor sentiment and the market reaction to dividend news: European evidence. Managerial Finance, 37(12), 1213-1245.
State Securities Commission of Vietnam. (2022). http://ssc.gov.vn/ubck/faces/vi/vimenu/vipages_vithongtinthitruong?_adf.ctrl-state=ff9qhkdsw_199&_afrLoop=6761234595000
To, L. P., & Dinh, T. H. Y. (2022). Effect of Market Sentiment And Economics on Stock Returns in Vietnam. Research Review, 3(01), 613-625.
Uygur, U., & Taş, O. (2014). The impacts of investor sentiment on returns and conditional volatility of international stock markets. Quality & Quantity, 48(3), 1165-1179.
Van, D. T. C. (2022). Research on investor sentiment on the Vietnamese stock market Trường Đại học Kinh tế TP. Hồ Chí Minh].
Widoatmodjo, S., & Siswanto, H. P. (2017). Eksistensi gosip di media sosial dalam menentukan return saham di bursa efek indonesia dan persistensi pengaruhnya bersama hari bursa. Jurnal Ekonomi, 22(2).
Ackert, L., & Deaves, R. (2009). Behavioral finance: Psychology, decision-making, and markets. Cengage Learning.
Alfano, S., Feuerriegel, S., & Neumann, D. (2020). Language sentiment in fundamental and noise trading: evidence from crude oil. Applied Economics, 52(49), 5343-5363.
Baker, M., & Wurgler, J. (2007). Investor sentiment in the stock market. The Journal
of Economic Perspectives, 21(2), 129–151.
Baklaci, H., Olgun, O., & Can, E. (2011). Noise traders: a new approach to understand the phantom of stock markets. Applied Economics Letters, 18(11), 1035-1041.
Banz, R. W. (1981). The relationship between return and market value of common stocks. Journal of financial economics, 9(1), 3-18.
Barber, B. M., & Odean, T. (2008). All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors. The Review of Financial Studies, 21(2), 785–818.
Berardi, M. (2022). Uncertainty and sentiments in asset prices. Journal of Economic Behavior & Organization, 202, 498-516.
Black, F. (1986). Noise. The journal of finance, 41(3), 528-543.
Bukovina, J. (2016, 2016/09/01/). Social media big data and capital markets—An overview. Journal of Behavioral and Experimental Finance, 11, 18-26. https://doi.org/https://doi.org/10.1016/j.jbef.2016.06.002
Cao, M. M., Nguyen, N.-T., & Tran, T.-T. (2021). Behavioral factors on individual investors' decision making and investment performance: A survey from the Vietnam Stock Market. The Journal of Asian Finance, Economics and Business, 8(3), 845-853.
Chan, F., Durand, R. B., Khuu, J., & Smales, L. A. (2017). The validity of investor sentiment proxies. International Review of Finance, 17(3), 473-477.
Crain, M. A. (2011). A literature review of the size effect. Available at SSRN 1710076.
Cuong, P. K., Ngoc, T. T. B., Cong, B. T., & Chau, V. T. Q. (2019). Noise trader risk: evidence from vietnam stock market. Hue University Journal of Science: Economics and Development, 128(5C), 5–16-15–16.
Dow, J., & Gorton, G. (1997). Noise trading, delegated portfolio management, and economic welfare. Journal of Political Economy, 105(5), 1024-1050.
Dung, P. T. T., & Duyen, N. T. (2020). Comparing the explanatory ability of 3 asset pricing models: CAPM, Fama French 3 factors and Fama French 5 factors on the Vietnamese stock market.
Dunham, L. M., & Garcia, J. (2021). Measuring the effect of investor sentiment on financial distress. Managerial Finance, 47(12), 1834-1852. https://doi.org/10.1108/MF-02-2021-0056
Eierle, B., Klamer, S., & Muck, M. (2022). Does it really pay off for investors to consider information from social media? International Review of Financial Analysis, 81, 102074.
Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance, American Finance Association, , vol. 25(2), 383-417.
Gu, C., & Kurov, A. (2020, 2020/12/01/). Informational role of social media: Evidence from Twitter sentiment. Journal of Banking & Finance, 121, 105969. https://doi.org/https://doi.org/10.1016/j.jbankfin.2020.105969
Hagenau, M., Liebmann, M., & Neumann, D. (2013). Automated news reading: Stock price prediction based on financial news using context-capturing features. Decision support systems, 55(3), 685-697.
Hua, F., & Wang, J. (2018). How investor sentiment impacts financial decision-making behavior: From a cognitive neuroscience perspective. NeuroQuantology, 16(5).
Jazbec, M., Pàsztor, B., Faltings, F., Antulov-Fantulin, N., & Kolm, P. N. (2021). On the impact of publicly available news and information transfer to financial markets. Royal Society Open Science, 8(7), 202321.
Kamath, A., Shenoy, S., & Kumar, S. (2022). An overview of investor sentiment: Identifying themes, trends, and future direction through bibliometric analysis. Invest. Manag. Financ. Innov, 19, 229-242.
Karabulut, Y. (2013). Can facebook predict stock market activity? SSRN scholarly paper No. ID 2017099 Retrieved 20-8 from https://papers.ssrn.com/abstract=2017099
Khuu, J., Durand, R. B., & Smales, L. A. (2017). Investor Sentiment and Japanese Stock Returns. Available at SSRN 2906633.
Li, X., Xie, H., Chen, L., Wang, J., & Deng, X. (2014). News impact on stock price return via sentiment analysis. Knowledge-Based Systems, 69, 14-23.
Lintner, J. (1965). Security prices, risk, and maximal gains from diversification. Journal of Finance, 20(4), 587-615.
Long, J. B. D., Shleifer, A., Summers, L. H., & Waldmann, R. J. (1990). Noise Trader Risk in Financial Markets. Journal of Political Economy, 98(4), 703-738. http://www.jstor.org/stable/2937765
Markowitz, H. (1952). Portfolio selection. Journal of Finance 7(1), 77-91.
Nguyen, C., Hoang, L., Shim, J., & Truong, P. (2020, 2020/04/01/). Internet search intensity, liquidity and returns in emerging markets. Research in International Business and Finance, 52, 101166. https://doi.org/https://doi.org/10.1016/j.ribaf.2019.101166
Nguyen, D., & Pham, M. (2018). Search-based sentiment and stock market reactions: an empirical evidence in Vietnam. Journal of Asian Finance, Economics and Business, 5(4), 45-56.
Nyakurukwa, K., & Seetharam, Y. (2023). Does online investor sentiment explain analyst recommendation changes? Evidence from an emerging market. Managerial Finance, ahead-of-print(ahead-of-print). https://doi.org/10.1108/MF-05-2022-0221
Phan, T. N. T., Bertrand, P., Phan, H. H., & Vo, X. V. (2023). The role of investor behavior in emerging stock markets: Evidence from Vietnam. The Quarterly Review of Economics and Finance.
Riabykh, A., Surzhko, D., Konovalikhin, M., & Koltcov, S. (2022). STTM: an efficient approach to estimating news impact on stock movement direction. PeerJ Computer Science, 8, e1156.
Sanders, D. R., Irwin, S. H., & Leuthold, R. M. (1997). Noise traders, market sentiment, and futures price behavior.
Schneider, M., & Nunez, M. (2024). A Decision Theoretic Foundation for Noise Traders and Correlated Speculation. Decision Analysis, 21(1), 4-22.
Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. The journal of finance, 19(3), 425-442.
Shleifer, A., & Summers, L. H. (1990). The noise trader approach to finance. Journal of Economic perspectives, 4(2), 19-33.
Siganos, A., Vagenas-Nanos, E., & Verwijmeren, P. (2014). Facebook's daily sentiment and international stock markets. Journal of Economic Behavior & Organization, 107, 730-743.
Siganos, A., Vagenas-Nanos, E., & Verwijmeren, P. (2017). Divergence of sentiment and stock market trading. Journal of Banking & Finance, 78, 130-141.
Simoes Vieira, E. (2011). Investor sentiment and the market reaction to dividend news: European evidence. Managerial Finance, 37(12), 1213-1245.
State Securities Commission of Vietnam. (2022). http://ssc.gov.vn/ubck/faces/vi/vimenu/vipages_vithongtinthitruong?_adf.ctrl-state=ff9qhkdsw_199&_afrLoop=6761234595000
To, L. P., & Dinh, T. H. Y. (2022). Effect of Market Sentiment And Economics on Stock Returns in Vietnam. Research Review, 3(01), 613-625.
Uygur, U., & Taş, O. (2014). The impacts of investor sentiment on returns and conditional volatility of international stock markets. Quality & Quantity, 48(3), 1165-1179.
Van, D. T. C. (2022). Research on investor sentiment on the Vietnamese stock market Trường Đại học Kinh tế TP. Hồ Chí Minh].
Widoatmodjo, S., & Siswanto, H. P. (2017). Eksistensi gosip di media sosial dalam menentukan return saham di bursa efek indonesia dan persistensi pengaruhnya bersama hari bursa. Jurnal Ekonomi, 22(2).