Abstract
This paper examines the causal relationship between developed and emerging market sentiment. Our analysis also extends to test whether the causality effect between developed and emerging market investor sentiment translates into significant implication for equity returns. Results reveal that in the short-run emerging market sentiment is not correlated with any developed market sentiment. In the long-run, a strong correlation is observed between emerging and developed market sentiment (US sentiment). The US and Europe sentiment affect emerging market sentiment both in the short and long-run. Emerging markets affect the US and Europe sentiment only in the long-run. The bidirectional causality between emerging market and developed market (the US and Europe) sentiment in the long-run suggests that sentiments index of two economies may feed on each other during crisis periods. The coherency tests suggest that the sentiment contagion effect between developed and emerging market is intensified during crisis periods.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
