Investor Sentiment and Employment

M. Montone, Remco Zwinkels

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We develop a multi-country model with moral hazard and noise traders, and show that investor sentiment should affect employment growth both domestically and abroad. Using a large sample of international industry-level data, we find strong support for the model's predictions. We show that US investor sentiment has a positive association with labor market conditions around the world, due to spillover effects as well as foreign direct investments from the US. We also find that US sentiment amplifies the negative effect of local financial crises on job losses, which supports the idea that financial development has a "dark side".
Original languageEnglish
Pages (from-to)1581-1618
Number of pages38
JournalJournal of Financial and Quantitative Analysis (JFQA)
Volume55
Issue number5
DOIs
Publication statusPublished - Aug 2020

Keywords

  • Investor sentiment
  • Labor market
  • Financial development
  • Financial crises

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