Investigating the Impact of Investor Sentiment and Volatility on Investment Behavior in the Gold Market

Background and Aim:The gold market has emerged as a prominent financial sector in Iran, attracting numerous investors since its inception in recent years.Consequently, a thorough understanding of investor behavior within this market is essential for informed decision-making and effective policy formulation.This study aims to investigate whether variables such as investor sentiment and volatility influence investor behavior in the gold market.Methods: This study employs a quantitative methodology to explore the research topic.A cross-sectional survey design was utilized to gather primary data from individual investors in the gold market.Participants were 384 individual investors participating in the gold market.Data collection regarding investor sentiment and investment behavior was carried out using a structured questionnaire.Furthermore, the study assessed the volatility of the gold market by calculating the standard deviation of daily returns over a one-month period.The structural equation modeling approach was utilized for data analysis.Results: The findings reveal that investment sentiment exerts a considerable influence on investment behavior, evidenced by a T-value of 5.553.Furthermore, investment sentiment was determined to have a significant effect on volatility, as indicated by a T-value of 5.394.Lastly, volatility was found to impact investment behavior, with a Tvalue of 6.475.The model fit statistics indicate that the research model exhibits a satisfactory fit.Conclusion: Additionally, the research identified a persistence in both market volatility and the sentiment index, indicating a direct relationship between sentiment and excess market returns.These results imply that investors perceive the market as weakly efficient, suggesting that the efficient market hypothesis may not adequately account for the behaviors observed in emerging markets, such as the gold market.