الفهرس 
Title : The Impact of Investor Sentiment on Stock Market Anomaly and Accounting Conservatism
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Abstract
Investor sentiment is a central pillar of behavioral finance, which justifies anomalies to the
asset’s intrinsic value. This paper investigates the sentiment effect on various portfolio returns,
considering the difference between sentiment-pone portfolios. Moreover, it investigates the
sentiment effect on firms’ commitment to adopt conservatism; utilizing Egyptian listed firm as
being an emerging market (i.e. 136 firms, corresponding to 5848 firm-quarter observations). The
quadratic-predictive analyses are used to reflect the dynamic association between sentiment and
portfolio return sorted upon size, value, dividend payout, tangibility, leverage, total risk,
profitability, and firm age. The findings suggest persistence of stock bubbles with ultimate
corrections in most portfolios (size, tangibility, and leverage); analogous to long line of research.
The results remain intact to the inclusion of size and value factors of Fama and French (1993),
and momentum factor of Carhart (1997) model; to discern the effect of various risk factors in the
underlying analysis. Hence, the results support the notion that sentiment is not a purely
contrarian indicator to stock return; asserting the sentiment seesaw phenomenon.
Moreover, when considering the sentiment-conservatism association, the findings reveal that
firms engage in less conservative financial reporting during high sentiment period; in a way to
reap more profit during prevailing optimistic period while lessen the harshly circumstances
during the pessimistic period, as well. Our inferences remain intact to the inclusion of alternative
measures of accounting conservatism as a robustness check, in addition to other classification
methods. One concern when splitting whole sample into speculative stocks and their
counterparts, the results are inconclusive; suggesting that value stocks are not likely sentimentimmune; analogous to line of literature. Hence, the findings embrace the notion that investor
sentiment is contagious in the stock market.
The results yield important implications for standard setters and regulators who disregard role of
accounting conservatism in stock market; especially so given, in an emerging economy whose
culture akin to herd-like behavior