Geographic Spillover of Dominant Firms' Shocks
In: 8th Miami Behavioral Finance Conference 2017
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In: 8th Miami Behavioral Finance Conference 2017
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In: Journal of international economics, Band 129, S. 103414
ISSN: 0022-1996
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In: Melbourne Institute Working Paper No. 22/20
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In: ICTs and Sustainable Solutions for the Digital Divide: Theoretical Issues, Forthcoming
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In: El-CHAARANI H., (2015), Volatility Spillover Between Lebanese Political Shocks and Financial Market Returns, Lebanese Science Journal (CNRS), Vol.16 (2) 2015.
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In: Journal of economic studies, Band 47, Heft 3, S. 433-465
ISSN: 1758-7387
PurposeThis study aims to investigate the impact of sentiment shocks based on US investor sentiments, bearish and bullish market conditions. Earlier studies, though very few, only consider the effect of investor sentiments on stock returns of emerging frontier Asian (EFA) markets.Design/methodology/approachThis study uses the application of regime switching model because of its capability to explore time-varying causality across different regimes unlike traditional linear models. The Markov regime switching model uses regime switching probabilities for capturing the potential asymmetries or non-linearity in a model, in this study's case, thereby adjusting investor sentiments shocks to stock market returns.FindingsThe results of the Markov regime switching method suggests that US sentiment, bullish and bearish market shocks act as a main contributors for inducing variation in EFA stock market returns. The study's non-parametric robustness results highlight an asymmetric relationship across the mean series, whereas a symmetric relationship across variance series. The study also reports Thailand as the most sensitive market to global sentiment shocks.Research limitations/implicationsThe sensitivity of the EFA markets to these global sentiment shocks highlights their sensitivity and implications for investors relying merely on returns correlation and spillover. These findings also suggest that spillover from developed to emerging and frontier equity markets only in the form of returns following traditional linear models may not be appropriate.Practical implicationsThis paper supports the behavioral aspect of investors and resultant spillover from developed market sentiments to emerging and frontier market returns across international equity markets offering more rational justification for an irrational behavior.Originality/valueThe study's motivation to use the application of regime switching models is because of its capability to explore time-varying causality across different regimes unlike traditional linear models. The Markov regime switching model uses regime switching probabilities for capturing the potential asymmetries or non-linearity in a model, in the study's case, thereby adjusting investor sentiments shocks to stock market returns. It is also useful of the adjustment attributable to exogenous events.
In: World development: the multi-disciplinary international journal devoted to the study and promotion of world development, Band 121, S. 63-74
World Affairs Online
In: RIBAF-D-22-00816
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In: IMF Working Papers, S. 1-35
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In: IREF-D-23-00658
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