Effects of investor sentiment on stock return volatility: A spatio-temporal dynamic panel model

摘要

Considering the spatial interaction of stocks, we develop a spatio-temporal dynamic panel model to study the effects of investor sentiment on stock return volatility. We construct a sample using data on A-share stocks from the Shanghai Stock Exchange from January 2012 to December 2018. We find that investor sentiment positively influences stock return volatility. Moreover, this influence exhibits both a temporal cumulative and spatial spillover effect. We also find that this spatio-temporal effect is more sensitive to economic than geographic factors. Our findings demonstrate the presence of a spatio-temporal effect on stock return volatility and emphasize the importance of understanding this effect to avoid risk underestimation. Thus, the proposed model can be of use for both investors and policymakers.