Investor Sentiment, Human Capital and Fama French Factors: Measurement and Performance in the Malaysian Market
Sentimen Pelabur, Modal Insan dan Faktor-Faktor Fama French: Pengukuran dan Prestasi di Pasaran Malaysia

Department of Finance
Faculty of Management Studies and Commerce
University of Sri Jayewardenepura
10250 Nugegoda, SRI LANKA.

chandana@sjp.ac.lk

Department of Accounting and Finance
Faculty of Economics and Business
University Malaysia Sarawak
94300 Kota Samarahan, Sarawak, MALAYSIA.

jmohamad@unimas.my

Abstract

This paper examines pricing implications of investors’ behavioral biasness in the Malaysian equity market. By using monthly data from January 2000, through January 2014, we explore the impact of investor sentiment, human capital, and Fama-French risk factors in multiple factor asset pricing models. A unique seven-variable composite index is used for the measurement of investor sentiment. Results indicate that sentiment is a priced risk, and display the ability to capture returns unexplained by SMB (Small minus Big) and HML (High minus Low) factors. Evidence suggests that sentiment is a source of systemic risk, and effectively explains returns of stocks with opaque characteristics. Modeling aggregate labor income produces insignificant results, suggesting that there are no returns for human capital in the Malaysian equity market. The Fama and French three factor model together with investor sentiment risk achieves a substantial pricing efficiency.

Keywords

human capital; Investor sentiment; Malaysia; returns
https://doi.org/10.17576/pengurusan-2019-55-11

Citation

Gunathilaka, C. G., & Jais, M. J. (2019). Investor Sentiment, Human Capital and Fama French Factors: Measurement and Performance in the Malaysian Market. Jurnal Pengurusan, 55, 135–146. https://doi.org/10.17576/pengurusan-2019-55-11

@article{gunathilaka2019investor,
  title={Investor Sentiment, Human Capital and Fama French Factors: Measurement and Performance in the Malaysian Market},
  author={Gunathilaka, Chandana and Jais, Mohamad},
  journal={Jurnal Pengurusan},
 

volume={55},
  number={},
  pages={135—146},
  year={2019},
  doi={https://doi.org/10.17576/pengurusan-2019-55-11},
  publisher={Penerbit UKM},
}

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55 (2019) 135 – 146

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