Measuring the Effect of Noise Trading on Bubbles in Tehran Stock Exchange

tohidi, mohammad

doi:10.52547/jemr.11.42.51

Volume 11, Issue 42 (12-2020) jemr 2020, 11(42): 51-81 | Back to browse issues page

‎ 10.52547/jemr.11.42.51

‎ 20.1001.1.22286454.1399.11.42.2.8

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tohidi M. Measuring the Effect of Noise Trading on Bubbles in Tehran Stock Exchange. jemr 2020; 11 (42) :51-81
URL: http://jemr.khu.ac.ir/article-1-2012-en.html

Measuring the Effect of Noise Trading on Bubbles in Tehran Stock Exchange

Mohammad Tohidi ^*

Imam Sadiq University , tohidi@isu.ac.ir

Abstract: (3594 Views)

Noise traders make decisions based on market sentiment and buy and sell assets based on unrelated information. These traders generally have poor timing, follow trends, and overreact to good or bad news. The experience of financial markets shows that noise traders cause excess volatility and deviation of the stock value from its intrinsic value. This study seeks to evaluate the role of noise traders on the occurrence of bubbles in the Tehran Stock Exchange in the period 2011 to 2017 .Therefore, the research hypothesis is: "The effect of noise trading on the occurrence of bubbles in the Tehran Stock Exchange is positive and significant." In this study, PCA method is used to extract a composite sentiment index, The GSADF method also is employed to determine the bubble periods of the Tehran Stock Exchange price index. Finally, the logit method is applied to measure the effect of noise trading on the bubble in the stock market price index. The results show that the effect of noise trading on the occurrence of bubbles is positive and significant. Also, the estimation of the final marginal effect indicates that the increase of one unit of optimistic sentiment and optimistic sentiment with a lag in the stock market increases the probability of bubbles by 24 and 28%, respectively.

Keywords: Noise Traders, Investor Sentiment, Bubble, Tehran Stock Exchange

Full-Text [PDF 2378 kb] (1192 Downloads)

Type of Study: Applicable | Subject: پولی و مالی
Received: 2020/05/17 | Accepted: 2021/02/8 | Published: 2021/04/20

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