INVESTOR SENTIMENT INDEX IN THE BRAZILIAN STOCK MARKET

Classical finance theory assumes that the effects of non-rational agents' decisions are quickly eliminated by rational agents' activity, preventing the persistence of unjustified deviations in the stock prices. In this approach, investor sentiment is considered an irrelevant factor. Contrariwise, behavioral finance suggests that the influence of cognitive biases on agents causes significant patterns in the market, which are not explained by fundamentals. Therefore, this work aims to build an investor sentiment index to the Brazilian market, for the period of 2008 to 2017. The sample consisted of 150 non-financial companies listed at B3, considering a liquidity restriction. The index was estimated by principal components analysis, selecting five proxies already employed in previous studies: share turnover, number of IPOs, equity share in new issues, dividend premium and trading index. Results showed consistency among the evolution of the sentiment index and Brazilian economic cycles, although turnover and trading index have not presented the expected sign. Correlation analysis between investor sentiment index and Ibovespa was also made. Empirical findings indicated a positive and statistically significant correlation, denoting that high (low) levels of investor sentiment are partially accompanied by a rising (falling) trend in Ibovespa.