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How does investor sentiment affect stock market crises?Evidence from panel data

Author

Listed:
  • Mohamed Zouaoui

    (University of Franche-Comté LEG (FARGO)-UMR 5118)

  • Geneviève Nouyrigat

    (University of Grenoble CERAG-UMR 5820)

  • Francisca Beer

    (California State University of San Bernardino)

Abstract

We test the impact of investor sentiment on a panel of international stock markets. Specifically, we examine the influence of investor sentiment on the probability of stock market crises. We find that investor sentiment increases the probability of occurrence of stock market crises within a one-year horizon. The impact of investor sentiment on stock markets is more pronounced in countries that are culturally more prone to herd-like behavior and overreaction or in countries with low institutional involvement.

Suggested Citation

  • Mohamed Zouaoui & Geneviève Nouyrigat & Francisca Beer, 2011. "How does investor sentiment affect stock market crises?Evidence from panel data," Working Papers CREGO 1110304, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
    • Handle: RePEc:dij:wpfarg:1110304
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    More about this item

    Keywords

    investor sentiment; noise trader; stock market crises;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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