The Impact of Investor Sentiment over Green Finance on Stock Market Activity: Based on the VAR Model

Ye Li ()
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Ye Li: University of International Business and Economics, School of Insurance and Economics

A chapter in Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025), 2025, pp 387-398 from Springer

Abstract: Abstract This study examines the impact of investor sentiment toward green finance on stock market activity. The research addresses the gap in understanding the dynamic relationship between green bond market activity and stock market performance, which is increasingly important as green finance continues to grow and influence sustainable investment practices. A VAR model was constructed after confirming stationarity with ADF tests and determining an optimal lag length of four. The Granger causality test demonstrated that green bond trading volume has predictive power for stock market trading volume, while impulse response analysis revealed a positive short-term impact of green bond market activity on stock trading volume that diminishes over time. The results highlight the role of investor preferences for green finance in driving short-term stock market activity but suggest that this influence fades as markets stabilize. The findings provide valuable insights for policymakers, investors, and regulatory bodies to better understand the intersection of green finance and market dynamics, ultimately promoting sustainable financial market development.

Keywords: Green Finance; Investor Sentiment; Stock Market; VAR Model (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-748-9_43

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DOI: 10.2991/978-94-6463-748-9_43

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