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Googling investor's sentiment, financial stress and dynamics of European market indexes: a Markov chain analysis

Author

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  • Fayrouz Souissi
  • Yousra Trichilli
  • Mouna Boujelbène-Abbes

Abstract

This study investigates the relationship between financial stress, googling investor's sentiment and indexes returns dynamics in five European markets. By using a Markov model, we find that the effect of the googling investor's sentiment on the stock market return highlights the persistence of the three regimes: bullish state for Germany and Spain; bearish state for Italy and the UK and stable state for France. For the effect of the stress index on the return, we note that France and Italy are in the bullish regime, the UK is in stable state and the persistence of the bearish regime for Germany and Spain. The smoothed and filtered probabilities suggest that the effect of googling investor's sentiment on market index return is subject to switching regime for all countries. For the stress index, results reveal the limited predictive power of financial stress on the change of regime of the financial markets.

Suggested Citation

  • Fayrouz Souissi & Yousra Trichilli & Mouna Boujelbène-Abbes, 2020. "Googling investor's sentiment, financial stress and dynamics of European market indexes: a Markov chain analysis," International Journal of Bonds and Derivatives, Inderscience Enterprises Ltd, vol. 4(2), pages 152-178.
    • Handle: RePEc:ids:ijbder:v:4:y:2020:i:2:p:152-178
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    Citations

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    Cited by:

    1. Oumayma GHARBI & Yousra TRICHILI & Mouna BOUJELBENE ABBES, 2022. "Impact of the COVID-19 pandemic on the relationship between uncertainty factors, investor’s behavioral biases and the stock market reaction of US Fintech companies," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 13(1), pages 101-122, June.
    2. Fu, Zheng & Chen, Zhiguo & Sharif, Arshian & Razi, Ummara, 2022. "The role of financial stress, oil, gold and natural gas prices on clean energy stocks: Global evidence from extreme quantile approach," Resources Policy, Elsevier, vol. 78(C).
    3. del Río, Cristina & Ferrer, Elena & López-Arceiz, Francisco J., 2024. "Analyst optimism and market sentiment: Evidence from European corporate sustainability reporters," Research in International Business and Finance, Elsevier, vol. 69(C).

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