Market Efficiency and Investor Behavior: Investor Behavior and Sentiment Analysis, Particularly How It Relates to Commercial Banks' Stocks.

EasyChair Preprint no. 12413

Abstract

This study delves into the intricate relationship between market efficiency and investor behavior, with a specific focus on the sentiment analysis of commercial banks' stocks. Grounded in the Efficient Market Hypothesis (EMH), which posits that stock prices reflect all available information, this research introduces a critical examination of how investor sentiment and psychological biases diverge from the expectations set by EMH, particularly in the banking sector. Through a comprehensive literature review, the study explores the theoretical underpinnings of market efficiency, behavioral finance, and the mechanisms through which investor sentiment influences stock prices. Employing quantitative analyses of historical data alongside case studies of significant banking sector events, the research establishes a tangible correlation between investor sentiment and the performance of bank stocks. It further investigates the roles macroeconomic factors, regulatory changes, and financial news play in shaping investor sentiment. The implications of these findings extend to both investors, suggesting strategies for mitigating psychological biases and incorporating sentiment analysis into investment decisions, and policymakers, highlighting the need for regulatory measures to ensure market stability and promote financial literacy. Conclusively, the study underscores the significant impact of investor sentiment on commercial banks' stock prices, challenging the conventional wisdom of EMH and advocating for a nuanced understanding that integrates behavioral insights. Future research directions are proposed to further explore sentiment analysis techniques and the evolving landscape of behavioral finance, aiming to bridge the gap between traditional financial theories and real-world market dynamics.

Keyphrases: Commercial Banks' Stocks, investor behavior, market anomalies, Market Efficiency

@Booklet{EasyChair:12413,
  author = {Klaus Hubert},
  title = {Market Efficiency and Investor Behavior: Investor Behavior and Sentiment Analysis, Particularly How It Relates to Commercial Banks' Stocks.},
  howpublished = {EasyChair Preprint no. 12413},

  year = {EasyChair, 2024}}