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Investor Sentiment and Employment

Author

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  • Montone, Maurizio
  • Zwinkels, Remco C. J.

Abstract

We develop a multi-country model with moral hazard and noise traders and show that investor sentiment should affect employment growth both domestically and abroad. Using a large sample of international industry-level data, we find strong support for the model’s predictions. We show that U.S. investor sentiment has a positive association with labor market conditions around the world, due to spillover effects as well as foreign direct investments from the United States. We also find that U.S. sentiment amplifies the negative effect of local financial crises on job losses, which supports the idea that financial development has a “dark side.”

Suggested Citation

  • Montone, Maurizio & Zwinkels, Remco C. J., 2020. "Investor Sentiment and Employment," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(5), pages 1581-1618, August.
    • Handle: RePEc:cup:jfinqa:v:55:y:2020:i:5:p:1581-1618_6
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    Cited by:

    1. Philip Barrett & Mariia Bondar & Sophia Chen & Mali Chivakul & Deniz Igan, 2024. "Pricing protest: the response of financial markets to social unrest," Review of Finance, European Finance Association, vol. 28(4), pages 1419-1450.
    2. Montone, Maurizio & Zhu, Yuhao & Zwinkels, Remco C.J., 2024. "Managerial sentiment and employment," Journal of Behavioral and Experimental Finance, Elsevier, vol. 43(C).
    3. Gomes, Orlando, 2015. "Optimal resource allocation in a representative investor economy," Economic Modelling, Elsevier, vol. 50(C), pages 72-84.
    4. Frijns, Bart & Huynh, Thanh & Zwinkels, Remco C.J., 2025. "Expectation formation in financial markets: Heterogeneity and sentiment," Journal of Economic Dynamics and Control, Elsevier, vol. 177(C).
    5. Herculano, Miguel C. & Lütkebohmert, Eva, 2023. "Investor sentiment and global economic conditions," Journal of Empirical Finance, Elsevier, vol. 73(C), pages 134-152.
    6. Huynh, Nhan & De Mello, Lurion & Li, Kai, 2025. "Evolution of investor sentiment: A systematic literature review and bibliometric analysis," International Review of Economics & Finance, Elsevier, vol. 100(C).
    7. Lan, Ge & Gao, Xin & Zheng, Xiaolan & Zhou, Hang & Li, Donghui, 2025. "Does short-selling threat potentially influence corporate risk-taking? Evidence from equity lending supply," International Review of Financial Analysis, Elsevier, vol. 97(C).

    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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