Can Stock Investor Sentiment Be Contagious in China?
Chi-Wei Su (),
Xu-Yu Cai () and
Ran Tao ()
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Chi-Wei Su: Department of Finance, School of Economics, Qingdao University, Qingdao 266000, China
Xu-Yu Cai: Department of Finance, School of Economics, Qingdao University, Qingdao 266000, China
Ran Tao: Qingdao Municipal Center for Disease Control & Preventation, Qingdao 266000, China
Sustainability, 2020, vol. 12, issue 4, 1-16
This paper explores the impact of investor sentiment on financial markets in China by taking the quantile causality test. We find that government bond markets, gold markets, and foreign exchange markets are affected by stock investor sentiment, except for in the corporate bond market. In extreme situations, such as excessively optimistic or pessimistic sentiment, these markets will become more vulnerable to suffering from drastic fluctuations. On the contrary, the market return in government bonds, corporate bonds, and foreign exchange also has an influence on stock investor sentiment. Moreover, these links show various asymmetry due to the heterogeneity of different financial markets. Our results are consistent with the noise trader model, which shows the impact of investor sentiment on market returns. Hence, the authorities can sustain the stabilization of financial markets by reducing information asymmetry, guiding the rational sentiment of investors, and increasing effective regulations.
Keywords: stock investor sentiment; market return; quantile causality test (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:12:y:2020:i:4:p:1571-:d:322696
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