Financial market connectedness: The role of investors’ happiness

Elie Bouri, Riza Demirer, David Gabauer and Rangan Gupta

Finance Research Letters, 2022, vol. 44, issue C

Abstract: We examine the relationship between investor sentiment and connectedness patterns across global stock markets within a quantile-on-quantile framework. Our findings show that investor happiness has a significant effect on both the return and volatility spillovers across global stock markets. While the sentiment effect is found to be relatively strong on volatility spillovers, we observe that the relationship between sentiment and connectedness is asymmetric for return and volatility connectedness. The findings suggest that both investors and policy makers should be particularly vigilant against sentiment shocks, in either direction, as these shocks can have significant risk effects, contributing to volatility spillovers globally.

Keywords: Equity Markets; Investor Happiness; TVP-VAR; Dynamic Connectedness; Quantile-on-Quantile Approach (search for similar items in EconPapers)
JEL-codes: C22 C32 G10 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001562

DOI: 10.1016/j.frl.2021.102075

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