The volatility connectedness of US industries: The role of investor sentiment

Dan Gabriel Anghel and Petre Caraiani

Economics Letters, 2024, vol. 235, issue C

Abstract: We investigate the influence of investor sentiment on the high-frequency volatility connectedness of US industry stock portfolios. Using a time series network approach, we find that two connectedness lags and triangular peer effects explain a significant amount of the network’s variability. We further find that squared investor sentiment is associated with a significant positive increase in the contribution of Energy stocks to volatility connectedness, at the expense of Consumer Services and Utilities stocks. The results imply the existence of sentiment-induced volatility transmission shocks driven by the Energy sector.

Keywords: Volatility connectedness; US industries; Market sentiment (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:235:y:2024:i:c:s0165176524000612

DOI: 10.1016/j.econlet.2024.111578

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