Does U.S. Investor Sentiment Attract Foreign Investors?

Abstract

Previous research shows that high sentiment among U.S. investors increases real investment both domestically and abroad. In this paper, we show that high sentiment among U.S. investors also prompts financially developed countries to invest more in the United States, especially if they exhibit a high level of educational attainment. The results suggest that the real effects of sentiment are larger than previously thought.

Keywords: Investor sentiment, Foreign direct investments, Financial development, Educational attaiment

JEL Classification: G10, G30, F21, J30.