Network information transmission of investor sentiment and asymmetric volatility spillover effects

This paper employs a two‐layer network approach to examine the interactive spillover effects between investor sentiment and asymmetric volatility in crude oil futures and related agricultural commodity futures. Asymmetric correlations among markets are observed not only in asset returns but also in the volatility spillovers within the double‐layer network. Specifically, the intra‐layer negative volatility spillovers exceed positive volatility spillovers, and the inter‐layer cross‐market spillover relationships are amplified under the interaction between negative volatility and investor sentiment. By decomposing the information structure, we reveal that the dual spillover channels of negative volatility and investor sentiment significantly enhance the informational content of cross‐market linkages. Investor sentiment, notably, provides significant explanatory power for information transmission in the two‐layer network. The information increments derived from the information transmission within the network by investors contribute to portfolio efficiency from the perspectives of risk, return, and cost. Thus, portfolios constructed with the double spillover effects of negative volatility and investor sentiment yield higher Sharpe ratios, with robust out‐of‐sample predictive performance.