Investor sentiment and stock return synchronicity in Tehran Stock Exchange

Investor sentiment about the capital market can play an important role in stock price trends, market transactions, and especially on the stock return synchronicity. The entry of many Individual investors who do not have enough information about investment, the study of this issue has made more important. To this end, in this research we investigate the relationship between investor sentiment and stock return synchronicity in Tehran Stock Exchange, by using the financial data of 167 firms listed on Tehran Stock Exchange from 15 various industries during ten years from March 2010 to March 2020. We use the Baker-Wurgler (2006) sentiment index as our primary measure of investor sentiment that Measured by principal component analysis. Also, three different methods have been used to measure the stock return synchronicity: the Mork model, the Carhart four-factor model and the Fama and French five-factor model. The results show that the Investors sentiment significantly affect on increasing stock return synchronicity. The findings also showed that the coefficients of positive and negative sentiment are not significantly different and as a result, positive and negative sentiment are symmetrically affecting the increase in stock return synchronicity.