Does Chinese investor sentiment predict Asia-pacific stock markets? Evidence from a nonparametric causality-in-quantiles test

Xiao Li

Finance Research Letters, 2021, vol. 38, issue C

Abstract: Unlike existing literature mainly focuses on the impacts of local investor sentiment on local stock market dynamics. This paper employs the nonparametric causality-in-quantiles test to investigate the predictability of Chinese investor sentiment (CIS) for returns and volatilities of 12 Asia-pacific stock markets. This novel method allows us to investigate the causality-in-mean and causality-in-variance. In particular, we mainly find that there exists a significant contagious effect from CIS to volatilities of Australia, Hong Kong, and India stock indexes, while very weak evidence of contagion from CIS to returns is found. These results are robust to alternative investor sentiment proxy, alternative volatility estimation, and alternative information criterion. Our findings should be noticeable to investors who are interested in cross-country investment.

Keywords: Investor sentiment; Nonparametric causality-in-quantiles test; Asia-pacific stock market; Investor sentiment contagion; Cross-country evidence (search for similar items in EconPapers)
JEL-codes: C22 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319312978

DOI: 10.1016/j.frl.2019.101395

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