Analyzing the Effect of Investor Sentiments on the Momentum of Excess Stock Returns in the Listed Companies on Tehran Stock Exchange

Articles in Press

Document Type : Research Paper

Authors

1 Department of Accounting, Faculty of Administrative Sciences And Economics, University of Isfahan, Isfahan, Iran

2 Department of Accounting, Faculty of Administrative Sciences and Economic, Isfahan University, Isfahan, Iran.

Abstract

By challenging the Efficient Market Hypothesis, the behavioral finance perspective asserts that investors’ decision-making is not driven solely by rationality and the pursuit of profit maximization. Instead, behavioral biases, such as investor sentiment, play a significant role in influencing investment decisions and, consequently, stock prices and returns. Accordingly, this study investigates the impact of investor sentiment on the momentum of excess stock returns, both in the short and long term, within the context of the Tehran Stock Exchange. A screening method was employed to select the sample, resulting in the inclusion of 169 listed firms. These firms were analyzed using multivariate regression models with panel data spanning 2011 to 2022 for the first hypothesis, and 2011 to 2020 for the second and third hypotheses, while controlling for year and industry effects. The findings indicate that investor sentiment positively affects the momentum of excess returns in the short term but has a negative impact in the long term. Moreover, the results suggest that investor sentiment exerts a stronger influence on the momentum of excess returns for smaller firms compared to larger firms over the long term.

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Journal of Asset Management and Financing

Articles in Press, Accepted Manuscript
Available Online from 01 December 2025

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