The conditional impact of investor sentiment in global stock markets: A two-channel examination

Wenzhao Wang, Chen Su and Darren Duxbury

Journal of Banking & Finance, 2022, vol. 138, issue C

Abstract: While investor sentiment has been shown to have a robust, direct impact on stock returns, we know little about how it impacts returns through an indirect channel from conditional volatility. We conduct a global study of investor sentiment across 40 international stock markets to examine the impact of investor sentiment on stock returns via both direct and indirect channels and how the impact varies across bull and bear market regimes. Using turnover ratio as the sentiment proxy and applying GARCH-type models, we confirm a conditional impact of investor sentiment on stock returns via both channels: In bull regimes, optimistic (pessimistic) shifts in investor sentiment would increase (decrease) stock returns, while in bear regimes, optimistic (pessimistic) shifts would decrease (increase) stock returns.

Keywords: Conditional volatility; Investor sentiment; Market regime; Stock return; Turnover ratio (search for similar items in EconPapers)
JEL-codes: G12 G15 G41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426622000589
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:138:y:2022:i:c:s0378426622000589

DOI: 10.1016/j.jbankfin.2022.106458

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().