Impact of sentiment indicators on the capital market dynamics and default probability

  • Ani Qankova Stoykova South-West University "Neofit Rilski" Blagoevgrad
  • Mariya Georgieva Paskaleva South-West University "Neofit Rilski" Blagoevgrad
  • Dinko Zhulien Stoykov South-West University "Neofit Rilski" Blagoevgrad
Keywords: capital markets, sentiment indicators, credit default swap, GARCH models

Abstract

This paper examines the impact of sentiment indicators on the financial market dynamics and default probability. First, we use GARCH models and Granger Causality Test in order to test the relationship between sentiment indicators and capital market dynamics of eleven Southeastern European countries.  Second, we employ GARCH models and Granger Causality Test to examine the influence of sentiment indicators on the sovereign credit risk in Bulgaria. The analyzed period is from January 2005 to November 2015. The results reveal that the consumer sentiment information and inflation expectations have influence on the financial market dynamics of SEE stock indices. Test results present that sentiment variables may explain CDS spread changes efficiently. We observe bilateral relations, which may be accepted as proves that turmoil periods may be led by panic and fear of investors without any enormous change in other factors.

Author Biographies

Ani Qankova Stoykova, South-West University "Neofit Rilski" Blagoevgrad
Depatment- Finance and Accounting
Mariya Georgieva Paskaleva, South-West University "Neofit Rilski" Blagoevgrad
Finance and Accountin
Dinko Zhulien Stoykov, South-West University "Neofit Rilski" Blagoevgrad
Finance and Accounting

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Published
2018-12-31
How to Cite
Stoykova, A., Paskaleva, M., & Stoykov, D. (2018). Impact of sentiment indicators on the capital market dynamics and default probability. International Journal of Contemporary Economics and Administrative Sciences, 8(2), 129-153. Retrieved from http://ijceas.com/index.php/ijceas/article/view/253
Section
Articles