الفهرس 
INTRODUCTIONOnly 14 pages are availabe for public view
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Abstract
Conclusion:
Investor sentiment may result from traders biased expectations on asset value and it may be considered as a noise in the financial stock market. In the same time, it can be considered as a phenomena of biased believes that may have negative consequences on companies’ firm performance.
The word ”sentiment” suggests positive and negative effects. Therefore, during periods of higher investor sentiment, when investors are bullish, investors become more optimistic about stock market prices and returns. On the other hand, periods of low sentiment, when investors are bearish, represent a case of investors’ pessimism toward the performance of the market.
Prior literature introduced two groups of measures that can be used to determine the level of investor sentiment in the stock market; direct sentiment measures, and indirect sentiment measures. Many had constructed index of investor sentiment. Following this line of research, this study constructed a composite index to measure the level of investor sentiment in the Egyptian stock market using three indirect measures of investor sentiment captured from the Egyptian environment.
Two types of investors can be identified in the stock market; (1) sophisticated rational investors and (2) unsophisticated irrational investors. Different bases of classifications can be considered to distinguish between the two groups; such as experience, age, wealth and trade size. It may be expected that experience may be a suitable classification base
The phenomena of investor sentiment can be understood through two concepts: limit to arbitrage and short sale constrain.
Limit to arbitrage exist due to noise trader risk in the market. Particularly, when irrational parties recognize negative belief shock, they may sell their securities to rational investors (arbitrageurs) with increased amounts. Which cause pushing stock prices away from its fundamental values leading to temporary decreases in stock returns, and resulting in a noise in the stock market. On the other hand, rationales may do not have the ability to arbitrage away or correct mispricing of stocks immediately, which result in limit to arbitrage
The concept of short sale constrain implies that while retail or individual uninformed investors may refrain from going short, they tend to enter the market in periods of overvaluation or undervaluation of stocks, short sale constrain keep them out of the market.
Investor sentiment can be considered as an important element in stock return generating process. Prior studies have investigated the effect of firm characteristics on the relation between investor sentiment and stock valuation. Generally, most of the studies stated that investor sentiment may have more effect on difficult to value and hard to arbitrage stocks. Particularly, stocks that are small, young, unprofitable and in firms that do not pay dividends. Hard to arbitrage stocks may result in higher transaction costs, and difficult to value stocks may result in more investors’ biases. However, few studies documented a negative pricing effect of sentiment in large value stocks, and others confirmed that both large and young firms are affected by sentiment fluctuations.
Legal investor protection rights and high level of transparency, or lower levels of financial opacity can protect against investors’ excessive biased expectations as a result of investor sentiment fluctuations, which can enhance the overall market performance as well as improve firm performance.
Financial opacity can be defined as the overall difficulty and complexity faced by different market participants to obtain adequate information from reported financial figures.
Financial complexity may result from inconsistency of accounting standards, investors’ exposure to uncertainties and risk, aggressive accounting practices, operations in multiple business, entering new markets, and proliferation of financing choices.
Firms also may not reveal more financial information to the different parties because its fear from hostile takeover, or for the reduction of its tax burden, to convince investors that the company is well performed.
Multiple negative consequences may result from financial reporting opacity, this include the imbalance between risk and return, corruption, opaque markets have higher propensity to crash risks, increasing information asymmetry in the market
Managers may opportunistically select the linguistic features, or in other words, alter their financial reports and disclosure policies to respond to fluctuations of investor sentiment and meet investors’ expectations.
Participants who have financial knowledge and literacy may engage in more financial practices and are less misled by sentiment fluctuations. Therefore, it can be expected that investor sentiment is positively associated with financial opacity and this relation may negatively affect future subsequent returns and firm performanc
.