Open AccessThe Extreme Decline of Investor Sentiment and Market Efficiency: Evidence from the Electric Appliances Industry in Japan
Author(s) -
Chikashi Tsuji
Publication year - 2012
Publication title -
journal of management research
Language(s) - English
Resource type - Journals
ISSN - 1941-899X
DOI - 10.5296/jmr.v4i2.1505
Subject(s) - market efficiency , financial economics , efficient market hypothesis , economics , market sentiment , relation (database) , empirical evidence , econometrics , monetary economics , business , stock market , computer science , biology , paleontology , philosophy , epistemology , horse , database
This paper aims to clarify whether weak form market efficient hypothesis holds in markets with deteriorated investor sentiment by focusing on the return dynamics of the Japanese electric appliances industry stocks. The contributions derived by our empirical analysis are as follows. First, this paper revealed that when investor sentiment is very stable, two successive days’ returns have no relation. Hence in markets with very stable sentiment, weak form market efficient hypothesis holds. Second, we clarified that when investor sentiment is deteriorated, two successive days’ returns are statistically significantly connected. Therefore, in markets with extremely declined investor sentiment, weak form market efficient hypothesis does not hold.