Stock Market Performance and Investor Sentiment: A Perspective of Economic Condition in Sub-Saharan Africa
DOI:
https://doi.org/10.61143/umyu-jafr.8(1)2025.016Keywords:
Investor Sentiment, Macroeconomic Factors, Stock Market Performance, Sub-Saharan AfricaAbstract
Traditionally, literature on stock markets has been predominantly rooted in the efficient market hypothesis (EMH) and the assumption of investor rationality. However, the stock markets across the globe including those in the sub-Sahara African region have witnessed numerous instances of irrational investor behaviour driven by emotional state and beliefs held by investors (behavioural factors beyond market fundamentals) that cannot be adequately explained by the EMH. Therefore, this study examined the effect of investor sentiment and macroeconomic factors on stock market performance in sub-Saharan Africa. This study employed ex post facto research design. Population of the study consists of 26 stock markets operating within the sub-Sahara African region, while 7 most capitalized stock markets in sub-Sahara African countries were purposively sampled. Secondary data were sourced from World Development Indicators (WDI) and African Financials covering the period of 1996 to 2023. The study employed System Dynamic Panel Data Estimation method. The results showed that investor sentiment with (β = 10.389; p-value = 0.000) has significant positive effect on stock market performance; macroeconomic index with (β = -1.666; p-value = 0.411) has negative insignificant effect on stock market performance; and moderating variable with (β = -3.161; p-value = 0.007) has negative significant effect on stock market performance. The study concluded that investor sentiment and macroeconomic factors affect stock market performance in sub-Saharan Africa. The study therefore recommended that investors should remain objective and base their investment decisions not only on emotions, but also on thorough evaluation of market fundamentals.
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