Is there any connectedness Between Investor Sentiment and Nigeria Stock Market Performance?
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Abstract
This study investigates the dynamic connectedness between the Nigerian Stock Exchange (ASI) and investor sentiment (IS) over the period from January 2009 to November 2024. Using a Quantile Vector Autoregressive (QVAR) model, the study explores how shifts in investor sentiment influence stock market performance across different market conditions, namely bearish, normal, and bullish. The results reveal a significant spillover effect between stock market performance and investor sentiment, particularly during periods of extreme market conditions. During bullish and bearish phases, the connectedness between the two variables is stronger, with investor sentiment amplifying stock market movements in both directions. In contrast, during normal market conditions, the relationship is more balanced. The study's results emphasize the importance of investor sentiment in understanding stock market fluctuations and provide valuable insights for policymakers, regulators, and investors seeking to navigate the complexities of market dynamics in emerging economies like Nigeria. The policy implications suggest that regulatory measures and investor education should focus on mitigating the influence of extreme sentiment to enhance market stability and reduce volatility during times of uncertainty.
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