Investor sentiment and employment

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".

Coauthor. Joint work with Remco Zwinkels (VU Amsterdam, Tinbergen Institute).

Manuscript. You can download the paper here.

Presentations. The NED Conference at the Dutch Central Bank, University College Dublin, the IFABS Corporate Finance Conference at the University of Oxford, the Helsinki Finance Seminar, the Israel Behavioral Finance Conference at Tel Aviv University, Vrije Universiteit Amsterdam, the Auckland Finance Meeting, the Research in Behavioral Finance Conference at Erasmus University Rotterdam, and the Erasmus Research Institute of Management.

Publication. Journal of Financial and Quantitative Analysis, Volume 55, Issue 5, August 2020, pp. 1581-1618. DOI: https://doi.org/10.1017/S0022109019000711.