Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322069 
Year of Publication: 
2025
Series/Report no.: 
ECB Working Paper No. 3050
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
The primary objective of this study is to explore the dynamic relationships between equity returns or volatility and sentiment factors in European markets during both the periods preceding the COVID-19 pandemic, the COVID-19 itself, and the Russia-Ukraine war. We achieve this by applying the network methodology initially introduced by Diebold & Yilmaz (2014), along with its extensions based on realized measures and generalized forecast error variance decomposition, as proposed by Baruník & Kérehlík (2018) and Chatziantoniou et al. (2023). Additionally, we investigate how the global sentiment factor influences the overall connectedness index by employing a quantile-on-quantile approach, following the methods outlined by Sim & Zhou (2015) and Bouri et al. (2022). To conduct our analysis, we utilize daily-frequency data encompassing the period from January 1, 2011, to December 31, 2023, covering the entirety of the COVID-19 pandemic in 2020 and the Russia-Ukraine conflict in 2022 across six European stock indices. Our primary discovery is the interconnectedness of both returns and sentiment. Furthermore, our results indicate that during the COVID-19 and Russia-Ukraine war, there is a notable increase in volatility spillovers among the analyzed stock indices, driven by the heightened interconnectedness between stock market returns.
Subjects: 
Investor sentiment
dynamic spillover and connectedness
European financial markets
COVID-19
Russia-Ukraine war
JEL: 
G11
G12
G14
G40
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-7242-0
Document Type: 
Working Paper

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