The Investor Sentiment Impact on the Egyptian Stock Market Volatility: A Non-Linear Framework

Empirical evidence investigating the dynamics between investor sentiment and the stock mean-variance framework remains inconclusive and unsettled. Therefore, the current study aims to examine the role of sentiment in the formation of the Egyptian systematic risk. It constructs a top-down aggregate sentiment index for the Egyptian stock market to assess the impact and predictive power of investor sentiment on the Egyptian stock market volatility within a non-linear conditional mean-variance framework. The findings confirm the impact of investor sentiment on market volatility. However, regarding the predictive ability of the sentiment index, the study emphasizes the need to account for structural breaks in future research when examining the effect of investor sentiment on the stock market mean-variance framework.