A parametric survival analysis of fundamental factors and sentiment index towards future stock returns : a new chapter of global financial crisis / Ahmad Fauze Abdul Hamit

The traditional financial theory was purposely invented to analyse the investment performance with the belief that the rational act of an investor could lead to decision making. Most of the theories developed came up with an assumption that the market is perfectly efficient. However, the evolution of the theory led many researchers to find evidences that the decision making process in investment activities could be influenced by the irrational behaviour and psychology of an investor. This is called as Behavioural finance Theory. In this study, linear regression model was used to investigate the effect of sentiment index and the fundamental factors towards future stock returns. Then a Parametric Survival Model by using Tog-logistic and Weibull Hazard Model was used to observe the existence and the size of rational bubbles in the market. A time series analysis was performed by using monthly data of NYSf. and NASDAQ from five sectors during Global financial Crisis period (2007-2009). It was found that only 27% out of 30 companies are significant. The sentiment index showed a weak negative relationship towards future stock return while the fundamental factors showed a strong negative relationship towards future stock returns and remained the major contributing factors. Lastly, small in size of rational bubbles were found during the Global Financial Crisis 2008.