Financial market connectedness : the role of investors' happiness
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Date
Authors
Bouri, Elie
Demirer, Riza
Gabauer, David
Gupta, Rangan
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
Abstract
We examine the relationship between investor sentiment and connectedness patterns across global stock markets within a quantile-on-quantile framework. Our findings show that investor happiness has a significant effect on both the return and volatility spillovers across global stock markets. While the sentiment effect is found to be relatively strong on volatility spillovers, we observe that the relationship between sentiment and connectedness is asymmetric for return and volatility connectedness. The findings suggest that both investors and policy makers should be particularly vigilant against sentiment shocks, in either direction, as these shocks can have significant risk effects, contributing to volatility spillovers globally.
Description
Keywords
Equity markets, Investor happiness, Time-varying parameter vector autoregressive (TVP-VAR), Dynamic connectedness, Quantile-on-quantile approach
Sustainable Development Goals
Citation
Bouri, E., Demirer, R., Gabauer, D. & Gupta, R. 2022, 'Financial market connectedness : the role of investors' happiness', Finance Research Letters, vol. 44, art. 102075, pp. 1-8, doi : 10.1016/j.frl.2021.102075.