Causality between market return and sentiment: New evidence from Saudi stock exchange using wavelet analysis

In this paper we investigate the causality between stock return and sentiment in Saudi stock market. we apply the wavelet-based method to explore the different time horizons of this relationship. The maximum overlap discrete wavelet transform (MODWT) is employed to decompose the series up to five timescales. We used the wavelet spectrum and the wavelet coherence to study the relationship between sentiment and return of different time horizons of investors. Finally, the granger causality test show the strong causality between return and sentiment in all time frequencies except from 2 to 4 months