The role of investor sentiment in taiwan stock market

Abstract

Aim of this study is to investigate the relationship between investor sentiment and stock returns in Taiwan stock market. In this manner, we employ consumer confidence index as an investor sentiment proxy. Stock return is measured by various stock market indices. Sample period extends from January of 2010 to June of 2015. We employ cointegration and error correction methods. Analysis results suggest the existence of a significant long-run relationship between investor sentiment and small cap stock returns. Furthermore, this relationship appears to be unidirectional from consumer confidence to small cap stock returns.