Effects of investor sentiment on stock return volatility: A spatio-temporal dynamic panel model

Shangwei Jiang and Xiu Jin

Economic Modelling, 2021, vol. 97, issue C, 298-306

Abstract: Considering the spatial interaction of stocks, we develop a spatio-temporal dynamic panel model to study the effects of investor sentiment on stock return volatility. We construct a sample using data on A-share stocks from the Shanghai Stock Exchange from January 2012 to December 2018. We find that investor sentiment positively influences stock return volatility. Moreover, this influence exhibits both a temporal cumulative and spatial spillover effect. We also find that this spatio-temporal effect is more sensitive to economic than geographic factors. Our findings demonstrate the presence of a spatio-temporal effect on stock return volatility and emphasize the importance of understanding this effect to avoid risk underestimation. Thus, the proposed model can be of use for both investors and policymakers.

Keywords: Spatio-temporal dynamic panel model; Investor sentiment; Stock return volatility; Spatio-temporal effect; Spatial spillover effect (search for similar items in EconPapers)
JEL-codes: C21 G12 G14 (search for similar items in EconPapers)
Date: 2021
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:ecmode:v:97:y:2021:i:c:p:298-306

DOI: 10.1016/j.econmod.2020.04.002

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