If Global or Local Investor Sentiments are Prone to Developing an Impact on Stock Returns, is there an Industry Effect?

TL;DR

This study examines how global and local investor sentiments influence stock returns across different industries in emerging markets, revealing significant local effects but limited global predictive power.

Contribution

It provides a comparative analysis of global versus local investor sentiment impacts on stock returns in multiple emerging countries and industries.

Findings

Local investor sentiments significantly affect returns in certain industries.

Global investor sentiments do not predict stock returns in these markets.

The impact varies across industry sectors and countries.

Abstract

This paper investigates the heterogeneous impacts of either Global or Local Investor Sentiments on stock returns. We study 10 industry sectors through the lens of 6 (so called) emerging countries: China, Brazil, India, Mexico, Indonesia and Turkey, over the 2000 to 2014 period. Using a panel data framework, our study sheds light on a significant effect of Local Investor Sentiments on expected returns for basic materials, consumer goods, industrial, and financial industries. Moreover, our results suggest that from Global Investor Sentiments alone, one cannot predict expected stock returns in these markets.