The Effect of Investors Sentiment and Accounting Information on Stock Price

Document Type : Research Paper

Authors

1 Associate Prof. Of Accounting, University Of Tehran

2 Ph.D. Student of Tehran University

3 Ph.D. Student of Islamic Azad University, Science and Research branch

Abstract

This paper analyzes the mechanism behind the effects of investor sentiment and accounting information on stock price, based on the residual income valuation model. This study Uses data from firms listed in Tehran Stock Exchange over a period of 6 Years (2009-2014, In Solar Calendar) and constructs investors' Sentiment Index and examines investors' sentiment effect on the perspective of the expected earnings growth and the required rate of return. Furthermore, this study investigates the joint effect of investors sentiment and accounting information on stock price, through the correlation method. The empirical results show that investors sentiment can change the expected earnings growth, and thus affects the stock price. However, investor sentiment has no significant effect on the required rate of return. In addition, interaction of accounting information and investors sentiment, in high volatility of earnings, can explain the stock price. It should be noted that accounting information has more effect on stock price when earnings are more stable; whereas the sentiment puts a greater impact on stock prices when there is more information uncertainty.

Keywords

Main Subjects

References

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History

  • Receive Date: 26 August 2016
  • Revise Date: 06 January 2017
  • Accept Date: 07 January 2017

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