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Asymmetric Transmission Channels of Investor Sentiment on Stock Return Volatility

Author(s)

Zhenyu Chu

Affiliation(s)

Liaoning University of International Business and Economics, Dalian, China

Abstract

Although it is known that the investor sentiment asymmetrically affects the stock volatility, how the differential mechanisms are unclarified. We use the Ashare data in China (2015--2025) to construct a composite sentiment index. We use the bootstrap mediation framework in the setting of multivariate regression. The results are as follows: (1) Pessimism's marginal effect on the volatility is about 1.4time that of optimism; (2) In the optimistic period, the liquidity channel is the dominate (the indirect effect is 38.6%); in the pessimistic period, the leverage channel is the dominate (the indirect effect is 52.7%); (3) The asymmetry is broaden to 2.54time in the bear market. These results can clarifying the mediation paths, and it also can give the differentiated risk monitoring.

Keywords

Investor Sentiment; Stock Return Volatility; Asymmetry; Transmission Channels; Mediation Effect

References

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