The Drivers of Market Sentiment : An Investigation with Malaysia Equity Market

Past research focused on sentiment proxy as a moderating variable in investigating firm’s return with its attribute variables. Investigate factors that manifest market sentiment itself is a new direction in market sentiment study. An approach built on data-driven market independent procedures to identify driving factors of sentiment. Ratio of current price to past moving average as a reflective measure of market sentiment is regressed on 4 factors extracted from 17 potential sentiment driving variables through Principal Component Analysis. The findings suggests that controlling financing for investment is an effective way to contain formation of undesired market sentiment and its dysfunction