The main purpose of this article is to confirm that whether investor's sentiments had any impact on the return of Karachi Stock Exchange (KSE). If the results are found to have an impact on returns of KSE, this will mark a new research area in the field to explain variation in returns based on behavioral factors. Time series analysis of auto regressive distributive lag (ARDL) is used in this study. The results indicate that our variables are cointegrated in the long run. Investor sentiments

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... proven to have positive and significant coefficient that indicates its impact on KSE returns. Further, the macroeconomic variable of inflation was also statistically significant. This study will help both practitioners and academicians in the sense that investors are not rational and sentiments dictate their investment decisions. The study proves that investor sentiments have a positive significant coefficient when it comes to explaining market returns. We believe that psychological factors that are rarely studied do have an important bearing on investor's decision making and consequently market returns of Pakistan in particular and world at large.