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Does Chinese investor sentiment predict Asia-pacific stock markets? Evidence from a nonparametric causality-in-quantiles test

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  • Li, Xiao

Abstract

Unlike existing literature mainly focuses on the impacts of local investor sentiment on local stock market dynamics. This paper employs the nonparametric causality-in-quantiles test to investigate the predictability of Chinese investor sentiment (CIS) for returns and volatilities of 12 Asia-pacific stock markets. This novel method allows us to investigate the causality-in-mean and causality-in-variance. In particular, we mainly find that there exists a significant contagious effect from CIS to volatilities of Australia, Hong Kong, and India stock indexes, while very weak evidence of contagion from CIS to returns is found. These results are robust to alternative investor sentiment proxy, alternative volatility estimation, and alternative information criterion. Our findings should be noticeable to investors who are interested in cross-country investment.

Suggested Citation

  • Li, Xiao, 2021. "Does Chinese investor sentiment predict Asia-pacific stock markets? Evidence from a nonparametric causality-in-quantiles test," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319312978
    DOI: 10.1016/j.frl.2019.101395
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    Cited by:

    1. Khan, Nasir & Saleem, Asima & Ozkan, Oktay, 2023. "Do geopolitical oil price risk influence stock market returns and volatility of Pakistan: Evidence from novel non-parametric quantile causality approach," Resources Policy, Elsevier, vol. 81(C).
    2. Long, Wen & Zhong, Yanqiang, 2023. "The neglected cohort: The impact of silent majority in social media on stock returns," Finance Research Letters, Elsevier, vol. 52(C).

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    More about this item

    Keywords

    Investor sentiment; Nonparametric causality-in-quantiles test; Asia-pacific stock market; Investor sentiment contagion; Cross-country evidence;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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