Abstract:
Purpose: This concept paper examines integrating investor sentiment into
asset pricing models, focusing on the Colombo Stock Exchange. It aims to
bridge the gap between traditional models and real-world dynamics,
enhancing portfolio strategies.
Design/Methodology/Approach: Employing a quantitative approach
aligned with the positivist research paradigm, utilizing secondary data from
2014 to 2023, and employing deductive reasoning.
Findings: The study may highlight the limitation of classical asset pricing
models in explaining portfolio returns, especially in volatile markets like Sri
Lanka, and might suggest the need for incorporating investor sentiment into
models.
Research limitations: Focus solely on non-financial companies listed on
the Colombo Stock Exchange.
Implications: The research will be an advancing study in frontier markets,
aid market participants, and guide future research in asset pricing and
portfolio management.
