Examine the effect of TWSE “pre-close information disclosure” on the relation among investor sentiment market return and volatility

Abstract

To reinforce market information disclosure and elevate market transparency during the closing session Taiwan Stock Exchange (TWSE) launches a pre-close information disclosure policy from February 20 2012 However whether policy implementation change the relationship between investor sentiment and market return is our main topic to discuss We hope the empirical result can provide policy maker a reference First our study applies the principal component analysis to construct the sentiment proxy and focuses on the component stocks of FTSE TSEC Taiwan 50 Index during the closing session Under the asymmetric dynamic conditional correlation (ADCC-GARCH) structure our study examines time-varying interrelationship between portfolio return and investors sentiment The research period covers from November 21 2011 to May 31 2012 In daily analysis portfolio return has a significant predictive power to investor sentiment It indicates investors can make trading decision based on new information released from the market In intraday analysis the effect of investor sentiment on portfolio return is significantly positive showing existing hold-more effect Meanwhile volatilities of return and sentiment are significantly positive affected by variability of previous trading day showing GARCH effect exists Besides unanticipated high sentiment variation is followed by volatile return whereas great variability of unexpected return change induces high sentiment volatility

Date of Award	2014 Sept 16
Original language	English
Supervisor	Meng-Feng Yen (Supervisor)