Investor Sentiment and Crash Risk in Safe Havens

19 Pages Posted: 14 Feb 2018

See all articles by Adnen Ben Nasr

Adnen Ben Nasr

Laboratoire BESTMOD

Matteo Bonato

University of Johannesburg - Department of Economics and Econometrics; Valdon Group GhmB

Riza Demirer

Southern Illinois University Edwardsville - Department of Economics & Finance; Economic Research Forum (ERF)

Rangan Gupta

University of Pretoria - Department of Economics

Date Written: February 1, 2018

Abstract

This study examines the relationship between investor sentiment and intraday return dynamics for safe haven assets, with particular focus on crash risk in these assets. Examining intraday returns for a wide range of safe havens proposed in the literature, we find that shocks to investor sentiment have a significant effect on most safe havens, while the sentiment is heterogeneous both in terms of its size and direction. While the strongest effects of sentiment shocks are observed in the case of Gold, Swiss Francs and Japanese Yen, interestingly, we find that oil stands out from the rest of the pack, responding negatively to sentiment shocks, suggesting that positive shocks to sentiment (i.e. high fear) increase crash risk for this asset. Our findings also point to intra-safe haven spillover effects, with oil exhibiting a markedly different pattern. Investment and hedging implications are discussed next.

Keywords: Investor Sentiment, Safe Haven Assets, Intraday Returns, Crash Risk

Suggested Citation

Ben Nasr, Adnen and Bonato, Matteo and Demirer, Riza and Gupta, Rangan, Investor Sentiment and Crash Risk in Safe Havens (February 1, 2018). Available at SSRN: https://ssrn.com/abstract=3116554 or http://dx.doi.org/10.2139/ssrn.3116554

Adnen Ben Nasr

Laboratoire BESTMOD ( email )

41 , rue de la liberté
Bouchoucha, Le Bardo, 2000
Tunisia

Matteo Bonato

University of Johannesburg - Department of Economics and Econometrics ( email )

P.O. Box 524
Auckland Park 2006, Johannesburg
South Africa

Valdon Group GhmB ( email )

Zurich
Germany

Riza Demirer (Contact Author)

Southern Illinois University Edwardsville - Department of Economics & Finance ( email )

Department of Economics & Finance
Alumni Hall 3144
Edwardsville, IL 62026-1102
United States
(618) 650-2939 (Phone)
(618) 650-3047 (Fax)

HOME PAGE: http://www.siue.edu/~rdemire/

Economic Research Forum (ERF)

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Cairo, Cairo
Egypt

HOME PAGE: http://erf.org.eg/affiliates/riza-demirer-3/

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

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