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Journal of Finance & Economics Research - Volume 4, Issue 1 2019
By Syed Ali Raza, Muhammad Mansoor, Khalid M. Iraqi
10.20547/jfer1904103
Keywords: Investor sentiment, different sectors, noise traders, market capitalization, behavioral finance.
This study investigates the effect of investor sentiment on the stock market capitalization on different economic sectors of Karachi Stock Exchange of Pakistan by using the data from the year 1972-2014. The findings of EGARCH model suggest that the Power and Fuel sector and the Chemical sector are more affected by investor sentiment as compared to the other sectors due to the presence of big giants' firms of Pakistani market in those sectors. Furthermore, it is concluded that noise traders are irrational traders and they follow news and trends. Therefore, it is recommended that a number of different educational and awareness programs should be introduced for the individual investors to make them financial literate, and through this process the number of knowledgeable investors can be increased and the impact of noise traders can be reduced.