A study on the effects of investor sentiment on return and volatility in selected indices

In this research, the effect of investor sentiment on selected country stock markets with high and upper-middle-income economies was examined. The data between 01 November 2013 and 31 December 2020 were evaluated and analyzed. Country CDS premiums, VIX, and MOVE indices were selected as investor sentiment representatives. In the application part of the study, first of all, the existence of a long-term relationship between investor sentiment and the stock market was examined with both structural fracture and Fourier-based cointegration tests. According to the structural fracture cointegration test, South Africa, Turkey, China, Indonesia, Russia, and Mexico; According to the Fourier-based cointegration test, a long-term relationship was found between investor sentiment and stock exchanges in Germany and Brazil. Thanks to Fourier-based tests, the presence of a cointegration relationship could be detected in Germany and Brazil, which were found to have soft fractures that structural fracture tests could not detect. The effect of investor sentiment on stock market returns and volatility was examined with the TVP-VAR model. Both the yield and yield volatility of all the country's stock markets examined within the scope of high-income economies were mostly determined from the VIX index among the selected investor sentiment indicators; It was found that all the country's stock exchanges (except S. Africa) examined within the scope of upper-middle-income economies were most affected by the country's CDS premiums. Periods when the total dynamic interconnectedness between investor sentiment returns/volatility and stock market returns/volatility is high; The end of 2013, the second quarter of 2017, the third quarter of 2019, March and April 2020. Except for the third quarter of 2019, other periods are when events that will cause global anxiety and fears take place; In the third quarter of 2019, national problems were experienced in all countries included in the scope of the review.