Investor sentiment and multi-scale positive and negative stock market bubbles in a panel of G7 countries

Renee van Eyden (), Rangan Gupta, Joshua Nielsen and Elie Bouri

Journal of Behavioral and Experimental Finance, 2023, vol. 38, issue C

Abstract: Firstly, we use the log-periodic power law singularity multi-scale confidence indicator (LPPLS-CI) approach to detect both positive and negative bubbles in the short-, medium- and long-term stock market indices of the G7 countries. Secondly, we apply heterogeneous coefficients panel data-based regressions to analyse the impact of investor sentiment, proxied by business and consumer confidence indicators, on the indicators of bubbles of the G7. Controlling for the impacts of output growth, inflation, monetary policy, stock market volatility, and growth in trading volumes, we find that investor sentiment increases the positive and reduces the negative LPPLS-CIs, primarily at the medium- and long-term scales for the G7, considered together, with the result being driven by at least five of the seven countries. Our results have important implications for both investors and policymakers, as the collapse (improvement) of investor sentiment can lead to a crash (recovery) in a bull (bear) market.

Keywords: Multi-scale bubbles and crashes; Investor sentiment; Business and consumer confidence; Panel regressions; G7 stock markets (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (10)

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Working Paper: Investor Sentiment and Multi-Scale Positive and Negative Stock Market Bubbles in a Panel of G7 Countries (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:38:y:2023:i:c:s2214635023000187

DOI: 10.1016/j.jbef.2023.100804

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