The role of investor sentiment in the long-term correlation between U.S. stock and bond markets

Fang, Libing; H, Yu; Huang, Yingbo

doi:10.1016/j.iref.2018.03.005

Cited by 42 publications

(17 citation statements)

References 35 publications

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“…In combating the negative impacts of the COVID-19 panic index on financial markets, and serving as an alternative investment tool in the times of panic and uncertainty,cryptocurrencies could be considered as a safe-haven during the crisis. This finding shows the hedging role of cryptocurrencies against the uncertainty raised by COVID-19 and is in line with previous studies that provide evidence on the hedging role of Bitcoin against uncertainty (Fang et al, 2018;Goodell and Goutte., 2020). Most of the other cryptocurrencies in our sample posted positive gains in response to an increase in the Covid-panic index.…”

Section: Discussionsupporting

confidence: 92%

Time Varying Dependence in the Cryptocurrency Market and COVID 19 Panic Index: An Empirical Investigation

Lamia

2022

IJEFI

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The aim of this paper is to study the interdependence between the Coronavirus Panic Index (PI) and major cryptocurrencies throughout the period of the Covid-19 pandemic.We investigate the evolution of cryptocurrency’s value following changes in the Covid panic index levels; then, we use the DCC-MIDAS specification to extract the long- and short-term volatility components of cryptocurrencies and study the responses of the cryptocurrencies to the pandemic panic index. The results show that the panic level metrics could be considered as a potential driver of cryptocurrencies volatility and has a significantly positive influence on the long-term cryptocurrencies correlation during stress levels. Our findings contribute to the existing literature in several ways. First ,we provide specific evidence on the driving effect of Covid panic index on cryptocurrencies’correlation during a crisis. Second, our paper adds to the current literature on cryptocurrencies and fills in the existing gap related to the lack of academic research on the pandemic’s impact on the cryptocurrency market. Third, the results offer interesting insights for future research and have important implications for investors, especially in understanding the cryptocurrencies’behavior and exploring whether cryptocurrencies can serve as a hedge against the COVID-19 crisis.

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Section: Discussionsupporting

confidence: 92%

Time Varying Dependence in the Cryptocurrency Market and COVID 19 Panic Index: An Empirical Investigation

Lamia

2022

IJEFI

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“…First, the ADCC model has been previously implemented for modelling volatilities and conditional correlations between financial markets ( Basher and Sadorsky, 2016 ), for testing optimal hedge ratios for clean energy stocks ( Ahmad et al, 2018 ), and for estimating the contagion effect during the COVID-19 pandemic ( Banerjee, 2021 ), among others. Sahamkhadam et al (2018) propose the use of the minimum Conditional VaR (Min-CVaR) for portfolio management, and Aziz et al, 2019 , Fang et al, 2018 , among others, compare the out-of-sample performance in the context of portfolio management. The great contribution of this paper consists of combining all these novel techniques in a single investigation, proposing an analysis in different stages, which we will be explained below.…”

Section: Literature Reviewmentioning

confidence: 99%

Revisiting the safe haven role of Gold across time and frequencies during the COVID-19 pandemic

Esparcia

Jareño²,

Umar³

2022

The North American Journal of Economics and Finance

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“…Their result indicated that optimistic (pessimistic) expectations of investors can move asset prices above (below) the basic value. By examining the long-term association between investor sentiment in the stock and bond market, Fang et al (2018) showed that the index of investor sentiment is positively associated with market volatility. Contradicting the fundamental tenets of the efficient market hypothesis, Shiller (1981) argued that investors are not completely rational, which could affect market prices aside from fundamental variables.…”

Section: Literature Reviewmentioning

confidence: 99%

An empirical examination of investor sentiment and stock market volatility: evidence from India

Haritha

Rishad

2020

Financ Innov

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Understanding the irrational sentiments of the market participants is necessary for making good investment decisions. Despite the recent academic effort to examine the role of investors’ sentiments in market dynamics, there is a lack of consensus in delineating the structural aspect of market sentiments. This research is an attempt to address this gap. The study explores the role of irrational investors’ sentiments in determining stock market volatility. By employing monthly data on market-related implicit indices, we constructed an irrational sentiment index using principal component analysis. This sentiment index was modelled in the GARCH and Granger causality framework to analyse its contribution to volatility. The results showed that irrational sentiment significantly causes excess market volatility. Moreover, the study indicates that the asymmetrical aspects of an inefficient market contribute to excess volatility and returns. The findings are crucial for retail investors as well as portfolio managers seeking to make an optimum portfolio to maximise profits.

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The role of investor sentiment in the long-term correlation between U.S. stock and bond markets

Cited by 42 publications

References 35 publications

Time Varying Dependence in the Cryptocurrency Market and COVID 19 Panic Index: An Empirical Investigation

Time Varying Dependence in the Cryptocurrency Market and COVID 19 Panic Index: An Empirical Investigation

Revisiting the safe haven role of Gold across time and frequencies during the COVID-19 pandemic

An empirical examination of investor sentiment and stock market volatility: evidence from India

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