Celebrating Success: Professor Darren Duxbury and Dr Chen Su

Congratulations to Prof Darren Duxbury, Dr Chen Su and Dr Wenzhao Wang for their paper entitled “The conditional impact of investor sentiment in global stock markets: A two-channel examination” which has recently been accepted for publication in the Journal of Banking and Finance.

The Journal of Banking and Finance is an internationally excellent financial economics journal publishing high quality articles in empirical finance.  It is a SJR Q1 journal in the “finance” and “economics and econometrics” categories.

“In the paper we examine the sentiment-return relationship in a global context spanning 40 stock markets.  More specifically, we investigate the impact of sentiment on stock returns through two channels, direct and indirect (via conditional volatility).  The direct channel reflects the impact of the direction of shifts in investor sentiment (SiIS), while the indirect channel reflects the impact of the magnitude of SiIS via conditional volatility.  We further consider how this differs across market regimes, including bull and bear conditions.”

Abstract

While investor sentiment has been shown to have a robust, direct impact on stock returns, we know little about how it impacts returns through an indirect channel from conditional volatility. We conduct a global study of investor sentiment across 40 international stock markets to examine the impact of investor sentiment on stock returns via both direct and indirect channels and how the impact varies across bull and bear market regimes. Using turnover ratio as the sentiment proxy and applying GARCH-type models, we confirm a conditional impact of investor sentiment on stock returns via both channels: In bull regimes, optimistic (pessimistic) shifts in investor sentiment would increase (decrease) stock returns, while in bear regimes, optimistic (pessimistic) shifts would decrease (increase) stock returns.