Suchergebnisse

This paper explores the impact of investor sentiment on financial markets in China by taking the quantile causality test. We find that government bond markets, gold markets, and foreign exchange markets are affected by stock investor sentiment, except for in the corporate bond market. In extreme situations, such as excessively optimistic or pessimistic sentiment, these markets will become more vulnerable to suffering from drastic fluctuations. On the contrary, the market return in government bonds, corporate bonds, and foreign exchange also has an influence on stock investor sentiment. Moreover, these links show various asymmetry due to the heterogeneity of different financial markets. Our results are consistent with the noise trader model, which shows the impact of investor sentiment on market returns. Hence, the authorities can sustain the stabilization of financial markets by reducing information asymmetry, guiding the rational sentiment of investors, and increasing effective regulations.

AbstractWe document that the Treasury market investor sentiment (TSENT) of institutional investors is a powerful predictor of bond risk premia. Specifically, TSENT positively predicts Treasury bond excess returns in and out of sample. The forecasting gains of TSENT are incremental to those in conventional bond return predictors: Fama–Bliss forward spreads, Cochrane–Piazzesi forward rate factor, and Ludvigson–Ng macro factor, as well as equity market sentiment proxies such as the investor sentiment index and the partial least squares sentiment index. Asset allocation analysis indicates the forecasting power of TSENT is economically valuable to investors. Finally, we show that the time‐series bond risk premia predictability associated with TSENT relates to its predictive power for macroeconomic performance, such as payroll employment, unemployment rate, and industrial production.