article · Journal of Behavioral and Experimental Finance
Analysis of seventy-three firms on the Casablanca Stock Exchange between 2004 and 2025 identifies two persistent behavioural trading states: speculative and depressed. These states, mapped via four market proxies covering sentiment, disposition, herding, and residual momentum, form a continuous gradient governed mainly by sentiment, disposition, and momentum. While both states persist longer than random benchmarks, their persistence levels do not statistically differ from one another. Crucially, ownership structure correlates with these states. Predominantly depressed stocks exhibit significantly lower institutional ownership, averaging 7.4 percent compared to 12.9 percent for speculative stocks, while free float and strategic concentration differentiate only the most persistent cases. Classifying stocks into these states provides a parsimonious measure of behavioural orientation that offers modest insight into future volatility, but does not provide predictive signals for stock returns beyond raw behavioural proxies.
Understanding how investor behaviour and ownership arrangements interact is vital for emerging equity markets. Demonstrating that institutional presence is associated with whether stocks settle into speculative or depressed conditions provides market participants and regulators with a clear, interpretable framework for measuring long-run market sentiment. This aids in tracking market stability and identifying structural vulnerabilities linked to low institutional participation.
The classification method functions as an analytical diagnostic tool for assessing market sentiment and volatility risk in emerging equity markets. Potential users include risk managers, asset managers, and financial market supervisors. Because the behavioural states offer only modest incremental volatility information and no predictive power for returns, the work represents early-stage research suited to descriptive portfolio risk monitoring rather than ready-to-deploy algorithmic trading strategies.
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This paper examines whether persistent behavioral trading states can be identified in an emerging equity market and whether ownership structure is associated with their persistence. Using 1072 stock-year observations for 73 firms listed on the Casablanca Stock Exchange over 2004-2025, we construct four market-based behavioral proxies capturing sentiment, disposition, herding, and residual momentum, and classify stock-years using fuzzy c-means. The evidence supports two broad behavioral states-speculative and depressed-although the underlying structure is best characterized as a continuous behavioral gradient driven primarily by a sentiment-disposition-momentum triad. Both states are more persistent than a marginal-preserving random benchmark, though depressed states are only modestly more persistent and the two are not statistically distinguishable. Cross-firm evidence shows that predominantly depressed stocks have significantly lower institutional ownership (7.4% vs. 12.9%); free float and strategic concentration separate the states only among the most persistent anchors. Behavioral-state membership adds modest incremental information for future volatility, but not beyond the raw behavioral proxies and not for returns; its value is thus as a parsimonious, interpretable measurement of behavioral orientation rather than a predictive signal. Overall, institutional ownership is associated with the long-run behavioral orientation of stocks in an emerging market.
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DOI: 10.1016/j.jbef.2026.101236
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