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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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    References listed on IDEAS

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    Cited by:

    1. Naifar, Nader, 2016. "Do global risk factors and macroeconomic conditions affect global Islamic index dynamics? A quantile regression approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 61(C), pages 29-39.
    2. Deven Bathia & Don Bredin, 2013. "An examination of investor sentiment effect on G7 stock market returns," The European Journal of Finance, Taylor & Francis Journals, vol. 19(9), pages 909-937, October.
    3. repec:taf:applec:v:50:y:2018:i:5:p:559-573 is not listed on IDEAS
    4. Ahmed Salhin & Mo Sherif & Edward Jones, 2016. "Investor Sentiment and Sector Returns," CFI Discussion Papers 1602, Centre for Finance and Investment, Heriot Watt University.
    5. Bhabra, Harjeet S. & Hossain, Ashrafee T., 2015. "Market conditions, governance and the information content of insider trades," Review of Financial Economics, Elsevier, vol. 24(C), pages 1-11.
    6. Deven Bathia & Don Bredin & Dirk Nitzsche, 2016. "International Sentiment Spillovers in Equity Returns," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 21(4), pages 332-359, October.
    7. repec:eee:ecofin:v:42:y:2017:i:c:p:546-563 is not listed on IDEAS
    8. Kamini Solanki & Yudhvir Seetharam, 2014. "Is consumer confidence an indicator of JSE performance?," Contemporary Economics, University of Finance and Management in Warsaw, vol. 8(3), September.
    9. repec:eee:riibaf:v:44:y:2018:i:c:p:459-470 is not listed on IDEAS
    10. Hu, May & Chao, Chi-Chur & Lim, Jin Hao, 2016. "Another explanation of the mutual fund fee puzzle," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 134-152.
    11. repec:eee:dyncon:v:91:y:2018:i:c:p:469-484 is not listed on IDEAS
    12. repec:eee:reveco:v:55:y:2018:i:c:p:21-36 is not listed on IDEAS
    13. repec:eee:intfin:v:51:y:2017:i:c:p:1-14 is not listed on IDEAS

    More about this item

    Keywords

    investor sentiment; noise trader; stock market crises;

    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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