Investor Sentiment and Employment

Maurizio Montone and Remco C. J. Zwinkels

Journal of Financial and Quantitative Analysis, 2020, vol. 55, issue 5, 1581-1618

Abstract: We develop a multi-country model with moral hazard and noise traders and show that investor sentiment should affect employment growth both domestically and abroad. Using a large sample of international industry-level data, we find strong support for the model’s predictions. We show that U.S. investor sentiment has a positive association with labor market conditions around the world, due to spillover effects as well as foreign direct investments from the United States. We also find that U.S. sentiment amplifies the negative effect of local financial crises on job losses, which supports the idea that financial development has a “dark side.”

Date: 2020
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Working Paper: Investor Sentiment and Employment (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:55:y:2020:i:5:p:1581-1618_6

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