Munich Personal RePEc Archive

Evidence of Investor Sentiment Contagion across Asset Markets

Pan, Wei-Fong (2018): Evidence of Investor Sentiment Contagion across Asset Markets.

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This study explores investor sentiment contagion across asset markets and relates specific asset market sentiments to other asset markets. The analysis reveals four main findings. First, investor sentiment highly correlates between equity markets. Second, investor sentiment in one asset market can affect those in other markets; for example, sentiments in the bond markets, particularly the US bond market, significantly Granger cause equity market sentiment, but not vice versa. Investor sentiments in the USD–JPY exchange market can Granger cause those in the Euro–USD, gold, and crude oil markets. Third, investor sentiments in the US asset markets have the largest contagion effects on asset markets given the resultant fluctuations in sentiments across other countries. Fourth, US asset market sentiments, especially bond market sentiment, can explain returns in other asset markets in different countries.

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