Recruiting investors sentiment in forecasting volatility (An examination on american stock market)

Abstract

The study is to examine the volatility fluctuations based on investor sentiment as various studies has been carried out in the past concentrating mostly on the current reaction of investors sentiment depending on historical volatility estimations. Closing data of NYSE index is considered as independent variable in analyzing both the historical volatility and sentiment index as they are valuated from them. Observation of 807 trading days from the period of 2015-2018 from American Stock Exchange is considered for the study. The study also helps to determine the use of dependent (ARMS Index and Historical Volatility) and independent variable (NYSE Closing price data) among themselves and the reliability of the independent variable. The viability of the dependent variable in deriving the values of the independent variable is analyzed and it as found out that both the dependent variables can act as independent variable in examining the other dependent variable.