Impact of Investor sentiment on Mean-Variance Tradeoff in Pakistan

Impact of investor sentiments on mean variance trade off with respect to Pakistani market has been investigated in this paper. Composite index for Investor Sentiments for Karachi stock exchange is developed. The six measures incorporated in the composite investor sentiment index are closed end fund discount, KSE turnover, the number of IPOs, average first day returns of IPOs, equity share in new issues and dividend premium. We find that the stock markets returns is not significantly related to low sentiments period variance rather it is negatively related to high sentiments period variance.