The Impact of Investor Sentiment on Portfolio Return Based on Fundamental and Technical Analysis

Abstract

This study examines the impact of sentiment measures on portfolio returns constructed on the basis of fundamental analysis and technical analysis to investigate how emotion momentum on account of behavioral finance explains in stock performance Whether the combined investment strategy with both fundamental and technical in-formation can beat the market was verified as well We start with investment portfolio formation by adopting two fundamental scoring systems - the FSCORE (Piotroski 2000) and the GSCORE (Mohanram 2005) incorporating technical momentum strategy consist of past return and past trading volume Then we consider a number of proxies to construct a comprise sentiment indicator by principal component analysis to explore the explaining ability of investor sentiment in portfolio returns The empirical evidence shows that the value stock investing strategy combined with momentum strategy outperform the growth stock investment strategy Additionally investor sentiment has positive influence and predictive power on current and future returns which indicating that investor sentiment indeed plays a role in sentiment-return relation and investing strategies combining sentiment measures can provide incremental value to the portfolio formed by using both fundamental and technical analysis as in-vestment strategies in Taiwan stock market

Date of Award	2018 Dec 10
Original language	English
Supervisor	Hsuan-Chu Lin (Supervisor)