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Behavioral finance and market microstructure studies suggest that the investor sentiment and liquidity are related. This paper aims to examine the aggregate sentiment–liquidity relationship in emerging markets (EMs) for both the sample period and crisis period. Then, it verifies this relationship, using the asymmetric sentiment.

This study uses a sample consisting of stocks listed on the SSE Shanghai composite index (348 stocks), the JKSE (118 stocks), the IPC (14 stocks), the RTS (12 stocks), the WSE (106 stocks) and FTSE/JSE Africa (76 stocks). This is for the period ranging from February, 2002 until March, 2021 (230 monthly observations). We use the panel data and apply generalized method-of-moments (GMM) of dynamic panel estimators.

The empirical analysis shows the following results: first, it demonstrates a significant relationship between the aggregate investor sentiment and the stock market liquidity for the sample period and crisis one. Second, referring to the asymmetric sentiment, we have empirically given proof that the market is significantly more liquid in times of the optimistic sentiment than it is in times of the pessimistic sentiment. Third, using panel causality tests, we document a unidirectional causality between the investor sentiment and liquidity in a direct manner through the noise traders and the irrational market makers and also a bidirectional causality in an indirect channel.

The results reported in this paper have implications for regulators and investors in EMs. Firstly, the study informs the regulators that the increases and decreases in the stock market liquidity are related to the investor sentiment, not financial shocks. We empirically evince that the traded value is higher in the crisis. Secondly, we inform insider traders and rational market makers that the persistence of increases in the trading activity in both quiet and turbulent times is associated with investor participants such as noise traders and irrational market makers.

The originality of this work lies in employing the asymmetric sentiment (optimistic/pessimistic) in order to denote the sentiment–liquidity relationship in EMs for the sample period and the 2007–2008 subprime crisis.

Investor sentiment (optimism or pessimism) may influence investors to follow others (herding) while taking their investment decisions. Herding may result in bubbles and crashes in the financial markets. The purpose of the study is to examine the presence of herding and the effects of investor sentiment on herding in China and Pakistan.

The investor sentiment is captured by five variables (trading volume, advance/decline ratio, weighted price-to-earnings ratio, relative strength index and interest rates) and a sentiment index developed through principal component analysis (PCA). The study uses daily prices of 2,184 firms from China and 568 firms from Pakistan for the period 2005 to 2018.

The study finds that herding prevails in China while reverse herding prevails in Pakistan. Interestingly, as investors become optimistic, herding in China and reverse herding in Pakistan decrease. This indicates that herding and reverse herding are greater during pessimistic periods. Further, the increase in herding in one market reduces herding in the other market. Moreover, optimistic sentiment in the Chinese market increases herding in the Pakistani market but the reverse is not true.

Considering the greater global financial liberalization, and better opportunities for emotion sharing, this study has important implications for regulators and investors. Market participants need to understand the prevalent irrational behavior before trading in the markets.

Since individual proxies may depict different picture of the relationship between sentiment and herding therefore the study also develops a sentiment index through PCA and incorporates this index in the analysis. Further, this study examines cross-country effects of herding and investor sentiment.

The purpose of this paper is to examine the role of online freelance stock analysts in correcting mispricing of hard-to-value firms during sentiment-driven market periods.

The sample covers 23,758 Seeking Alpha articles obtained for the period between January 2005 and September 2011. The authors use OLS regressions to test the stock market reaction around Seeking Alpha analysts’ reports. The information in online analysts’ reports is measured by the tone of stock articles posted in SeekingAlpha.com (SA).

The analysis reveals that the degree of negative tone of their stock articles is related to three-day stock returns around the article posting dates. It further reveals that the relation between these returns and prevailing market sentiment depends on firm-specific susceptibility to the market sentiment. The three-day stock returns are higher during low market sentiment periods for firms that are more susceptible to the market sentiment, hence, harder to value. The tone of the stock articles during low sentiment periods also predicts the news in the forthcoming earnings.

The findings help stock investors identify value-relevant information provided by online freelance stock analysts, particularly for hard-to-value stocks and during the low market sentiment period.

This study utilizes a unique dataset obtained from SA. This is the first paper to examine whether online analysts help investors correct potential undervaluation of hard-to-value firms during the low market sentiment period.

The purpose of this paper is to empirically test whether stock liquidity and investor sentiment have interactive effects on seasoned equity offers (SEOs) price discounts in Australia.

The authors focus on the implicit cost borne by firms when issuing seasoned equity capital. This cost is measured as the relative difference between the SEO offer price and the last close price prior to the announcement of the issue. The primary measure of investor sentiment is a composite index constructed similar to that in Baker and Wurgler (2007).

The results show that, in periods of deteriorating investor sentiment, the increase in SEO price discounts for firms with illiquid stocks is larger than the corresponding increase for firms with liquid stocks. This suggests that, as sentiment wanes, investors become even more concerned about illiquidity, leading to even greater required compensation for holding illiquid assets. The authors find that information asymmetry is positively related to SEO price discounts but this relation is not affected by changing investor sentiment.

Collectively, the empirical results provide support for the argument that price discount of SEOs represents compensation to investors for bearing costs associated with illiquidity. The results also lend some support to the behavioural argument that pricing of equity offers is dependent upon investor sentiment, particularly for firms with illiquid stocks.

The ability for firms to raise capital in a cost-effective manner is critical for firm growth and stability. Investors require compensation for bearing the costs of illiquidity of their investments in equity. Accordingly, firms need to be conscious of their stocks’ existing liquidity and its influence on the cost of raising additional capital which, in turn, affects their operational stability and investment opportunities.

Ultimately, the implications of this study will assist firms in capital-raising decisions, investors in making portfolio investment decisions, and investment banks in setting offer prices on equity issues.

To the best of the authors’ knowledge, this is the first study to examine the interaction between investor sentiment and SEO price discounts in Australia.

This paper aims to examine the effects of investor sentiment on the development of the real estate corporate bond market in Vietnam.

The research uses an autoregressive distributed lag (ARDL) model with quarterly data. Additionally, the study employs Google Trends search data (GVSI) related to topics such as “Real Estate” and “Corporate Bond” to construct a sentiment index.

The empirical outcomes reveal that real estate market sentiment improves the growth of the real estate corporate bond market, while stock market sentiment reduces it. Also, there is evidence of a long-run negative effect of corporate bond market sentiment on the total value of real estate bond issuance. Further empirical research evidences the short-term effect of sentiment and economic factors on corporate bond development in the real estate industry.

Due to difficulties in collecting data, this paper has the limited sample of 54 valid quarterly observations. Moreover, the sentiment index based on Google search volume data only reflects the interest level of investors, not their attitudes.

These results yield important implications for policymakers in respect of strengthening the corporate bond market platform and maintaining stability in macroeconomic and monetary policies in order to promote efficient and sustainable market development.

The study offers some suggestions for regulators and governments to improve the real estate corporate bond market.

This is the first quantitative study to examine the effect of sentiment factors on real estate corporate bond development in Vietnam.

This paper examines the impact of macroeconomic and risk factors on the profitability and volatility of professional momentum portfolios for the US, the UK, Japan and Germany, for the period 1998–2018. Many of the factors employed, such as energy price changes and economic policy uncertainty, have been largely neglected in the relevant literature.

Regression analysis, VECTOR AUTOREGRESSION (VAR), Panel-VAR, Variance Decomposition Analysis

The results indicate that, since the financial crises in the US and the EU, energy prices and economic-policy uncertainty have become important return determinants, along with market-related uncertainty that seems to have a stable impact over time, especially for the U.S. and U.K. portfolios.

Economic policy uncertainty significantly affects contemporaneous momentum returns in the US, UK and Japan, mainly between 2007 and 2018, while market-related uncertainty affects all markets during all subperiods. In addition, the variance of market-related uncertainty (VIX) explains a large percentage of the variance in the momentum returns for the US, UK and Germany.

The main implication of the findings for portfolio managers is that a manager may increase (decrease) exposure to the momentum factor during optimistic (pessimistic) periods and during periods of rising energy prices (high economic policy and market-related uncertainty).

The paper examines the impact of factors, such as energy prices and economic policy uncertainty, which have been largely neglected in the relevant literature on the possible drivers of the momentum strategies. It employs professional portfolios that are often used in practice as benchmark indexes.

This study aims to investigate whether and how different sentiments affect the stock market’s reaction to the American Customer Satisfaction Index (ACSI) information.

The portfolio approach, with time-varying risk factor loadings and the asset-pricing models, is borrowed from the finance literature to investigate the ACSI-performance relationship. A direct sentiment index is used to examine how investors’ optimistic, neutral and pessimistic sentiments affect the aforementioned relation.

This paper finds that customer satisfaction is a valuable intangible asset that generates positive abnormal returns. On average, investing in the Strong-ACSI Portfolio is superior to investing in the market index. Even when the stock market holds pessimistic beliefs, investors can beat the market by investing in firms that score well on customer satisfaction. The out-performance of our zero-cost, long–short ACSI strategy also confirms the mispricing of ACSI information in pessimistic periods.

Findings are limited to firms covered by the ACSI data.

Finance research has further documented evidence of the stock market under-reacting to intangible information. For example, firms with higher research and development expenditures, advertising, patent citations and employee satisfaction all earn superior returns. Literature also proves that investors efficiently react to tangible information, whereas they undervalue intangible information. In summary, combining our results and those reported in the literature, customer satisfaction is value-relevant for both investors and firm management, particularly in pessimistic periods.

This study is the first to investigate how sentiment affects the positive ACSI-performance relationship, while considering the time-varying property of risk factors. This study is also the first to show that ACSI plays a more important role during pessimistic periods. This study contributes to the growing literature on the marketing–finance interface by providing better understanding of how investor emotional states affect their perceptions and valuations of customer satisfaction.

The main objective of this paper is to investigate whether the investors' behavior under optimistic (pessimistic) conditions has an impact on risk transmission between the Chinese stock and bond markets and the sector indices mainly during the COVID-19 pandemic.

This study uses a new measure of the investor's sentiment based on Google trend to construct a Chinese investor's sentiment index and a quantile causal approach to examine the causal relationship between googling investor's sentiment and the Chinese stock and bond markets as well as the sector indices. On the other hand, the network connectedness is used to estimate the spillover effect on the investor's sentiment and index returns. To check the robustness of the study results, the authors employed the Chinese VIX, as another measure of the investor's sentiment using daily data from May 2019 to December 2020.

In fact, the authors found a dual causality between the investor's sentiment and the financial market indices in optimistic or pessimistic situations, which indicates that positive and negative financial market returns may have an effect on the Chinese investor's sentiment. In addition, the results indicated that a pessimistic investor's sentiment has a negative impact on the banking, healthcare and utility sectors. In fact, the study results provide a significant peak of connectivity between the investor's sentiment, the stock market and the sector indices during the 2015–2016 and 2019–2020 turmoil periods that coincide respectively with the 2015 recession of the Chinese economy and the COVID-19 pandemic.

This finding suggests that the Chinese googling investor's sentiment is considered as a prominent channel of shock spillovers during the coronavirus crisis, which confirms the behavioral contagion. This study also identifies the contribution of a particular interest for portfolio managers and investors, which helps them to accordingly design their portfolio strategy.

Using a fiscal sentiment indicator, this study aims to verify whether fiscal sentiment affects the yield curve in Brazil. Since policymakers highlight the coordination between monetary and fiscal policies and the importance of fiscal policy to the expectations formation process in inflation targeting regimes, the authors also explore the transmission mechanism through inflation expectations. Hence, the study also analyzes the effect of fiscal sentiment on interest rate swap spreads through the inflation expectations channel.

Based on information obtained from official communiqués about fiscal policies issued by the Central Bank of Brazil and the Brazilian Ministry of Finance, the study builds a fiscal sentiment indicator. The econometric strategy to verify whether fiscal sentiment is related to the short tail of the yield curve is based on time series analysis through ordinary least squares and generalized method of moments estimates. In turn, to estimate the transmission mechanism through inflation expectations, the model uses interaction terms between fiscal sentiment and inflation expectations.

The results suggest a more optimistic (pessimistic) fiscal sentiment reduces (increases) swap spreads. The findings reveal that improvements in fiscal credibility and a more optimistic fiscal sentiment are able to reduce the positive marginal effect that inflation expectations variations have on interest rate swap spreads.

This study contributes to the literature, as, to the best of authors’ knowledge, it is the first to analyze the content of the communiqués related to fiscal policy, and based on this content, it extracts the sentiment related to the fiscal environment and analyzes the effect of this sentiment on the yield curve. Besides, different from existing studies that analyze the effect of fiscal backward-looking aspects (such as public debt, budget balance, taxes and public spending) on the yield curve, this study investigates forward-looking aspects related to fiscal policy (such as fiscal credibility and fiscal sentiment).

Although the pervasive influence of investor sentiment in equity markets is well documented, little is known about behavioral manifestations in bond markets. In this paper, we explore the impact of investor sentiment on corporate bond yield spreads. Our results reveal that bond yield spreads co‐vary with sentiment, and sentiment‐drivenmispricings and systematic reversal trends are very similar to those for stocks. Bonds appear underpriced (with high yields) during pessimistic periods and overpriced (with low yields) when optimism reigns. Consequent reversals result in predictable trends in post‐sentiment yield spreads.When beginning‐of‐period sentiment is low, subsequent yield spreads are low; high sentiment periods are followed by high spreads. High‐yield bonds (low ratings, Industrials and Utilities, extreme maturities or low durations, specially if low rated) demonstrate greater susceptibility to mispricings due to sentiment compared to low‐yield bonds. The incremental yield spread gap between highand low‐yield bonds converges subsequent to periods of low sentiment, and diverges after high sentiment. Equity attributes marginally influence the impact of sentiment on bond spreads, but mostly for distressed bonds only.