The impact of retail investor sentiment on the conditional volatility of stocks and bonds: Evidence from the Tel-Aviv stock exchange

Elroi Hadad and Haim Kedar-Levy

International Review of Economics & Finance, 2024, vol. 89, issue PA, 1303-1313

Abstract: We measured bond and stock conditional return volatility as a function of changes in sentiment, proxied by six indicators of the Tel-Aviv Stock Exchange. We found that changes in sentiment affect conditional volatilities at different magnitudes and often in an opposite manner in the two markets, subject to market states. We are the first to measure the bond conditional return volatility of retail investor sentiment, thanks to a unique dataset from a limit-order book with highly active retail traders. This market structure differs from the prevalent over-the-counter platforms, where institutional investors are active, yet less prone to sentiment.

Keywords: Sentiment; Bond market; Stock market; Behavioral finance (search for similar items in EconPapers)
JEL-codes: D14 D53 G15 G40 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:89:y:2024:i:pa:p:1303-1313

DOI: 10.1016/j.iref.2023.09.002

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