Investor Sentiment and Sovereign Risk:Empirical Evidence from an Emerging Market
Author(s)
Download Full PDF Pages: 11-18 | Views: 470 | Downloads: 123 | DOI: 10.5281/zenodo.3404581
Abstract
This paper aims to test the relationship between investor sentiment and sovereign risk in Turkey for the period 2004-2010. Our findings support that there is no cointegration, in other words long term relationship between investor sentiment and sovereign risk. In short run, we find causality relationship from investor sentiment and sovereign risk. The findings of the paper is important for Turkish government officials and market participants.
Keywords
Investor sentiment, sovereign risk, cointegration, Granger causality
References
i. Baker, Malcolm, and Jeremy Stein, (2004). “Market liquidity as a sentiment indicator, Journal of Financial Markets 7, 271-299.
ii. Baker, Malcolm, and Jeffrey Wurgler, (2004). “A catering theory of dividends, Journal of Finance 59, 1125–1165.
iii. Brown, Gregory W., and Michael T. Cliff. (2004). “Investor Sentiment and the Near-Term Stock Market.” Journal of Empirical Finance, 11(1): 1– 27.
iv. Diaz-Weigel D. and G Gemmill (2006). “What drives credit risk in emerging markets? The roles of country fundamentals and market comovements” Journal of International Money and Finance 25, 476-502.
v. Dickey, D.A. and Fuller, W.A., (1981). “Distribution of the estimators for autoregressive time series with a unit root”, Econometrica 49, 1057--72.
vi. Dumičić, M. and Ridzak, (2011). T. Determinants of sovereign risk premia for European emerging markets. Financial Theory and Practice, 35 (3), 277-299.
vii. Eichengreen, B., and Mody, A. (1998). “What Explains Changing Spreads on Emerging Market Debt: Fundamentals or Market Sentiment”, National Bureau of Economic Research. Working Paper Series, No. 6408.
viii. Frazzini Andrea and Owen A. Lamont, (2005). "Dumb Money: Mutual Fund Flows and the Cross-Section of Stock Returns,"NBER Working Papers 11526, National Bureau of Economic Research, Inc.
ix. Johensen, S. and K. Juselius (1990). “Maximum Likelihood Estimation and Inference on Cointegration: with Application to the Demand for Money”, Oxford Bulletin of Economics and Statistics, 52, 169-210
x. Kamstra, M. J., L. A. Kramer, and M. D. Levi (2003). Winter blues: a sad stock market cycle. American Economic Review 93, 324–341.
xi. Kumar, Alok, and Charles M. C. Lee, (2006). Retail investor sentiment and return comovements, Journal of Finance 61, 2451-2485.
xii. Lee, W.Y., C.X. Jiang and D.C. Indro (2002). “Stock Market Volatility, Excess Returns and the Role of Investor Sentiment”, Journal of Banking and Finance, 26: 2277-99.
xiii. Lee, C. M., Shleifer, A. and Thaler, R. H., (1991). “Investor sentiment and the closed-end fund puzzle’, Journal of Finance, Vol. 46, no. 1, pp. 75–109.
xiv. Lemmon M., Portniaquina E., (2006). “Consumer confidence and asset prices: Some empirical evidence,” Review of Financial Studies, 19, 4, 1499 – 1529.
xv. Malcolm Baker & Jeffrey Wurgler, (2007). "Investor Sentiment in the Stock Market," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 129-152
xvi. Neal, R., & Wheatley, S. M. (1998). Do Measures of Investor Sentiment Predict Returns? Journal of Financial and Quantitative Analysis, 33, 523-547. http://dx.doi.org/10.2307/2331130
xvii. Schmeling, Maik, (2009). "Investor sentiment and stock returns: Some international evidence,"Journal of Empirical Finance, Elsevier, vol. 16(3), pages 394-408
xviii. Shiller, R. J. (2000). "Measuring bubble expectations and investor confidence." 1:1, pp. 49- 60.
xix. Siegel, Jeremy J., (1992). “Equity risk premia, corporate profit forecasts, and investor sentiment around the stock crash of October 1987, Journal of Business 65, 557-570.
xx. Spyrou, Spyros I. (2011). “ Are Sovereign Bond Yield Spreads Affected by Investor Sentiment? Evidence from the Greek Budget Crisis”, vailable at RN:http://ssrn.com/abstract=1856943 or http://dx.doi.org/10.2139/ssrn.1856943
xxi. Subhankar Nayak, (2010). "Investor Sentiment and Corporate Bond Yield Spreads", Review of Behavioral Finance, Vol. 2 Iss: 2, pp.59 – 80
xxii. Zhang, Meng , (2010). "Investor Sentiment Index and Stock Return: Analysis of Closed-end Fund Discount and Market Turnover" Available at: http://works.bepress.com/meng_zhang/1.
xxiii. Zouaouı M., G.Nouyrıgat, F.Beer, (2010). “How does investor sentiment affect stock market crisis? Evidence from panel data”, Available at: http://halshs.archivesouvertes.fr/docs/00/53/47/54/PDF/cr_2010_08_E2 .pdf
xxiv. Zweig, Martin E., (1973). “An investor expectations stock price predictive model using closed-end fund premiums”, Journal of Finance 28, 67–8
Cite this Article: