Sentiment and stock market connectedness: Evidence from the US - China trade war

We assess the impact of monthly and daily investor sentiment on stock market return and volatility connectedness during the U.S.-China trade war period. Our analyses focus on the connectedness between the two economies and their major trading partners. We also investigate the asymmetric impact of sentiment on volatility connectedness by exploring the upside and downside markets separately. We consistently document a negative relationship between investor sentiment and stock market connectedness for both return and volatility. We further confirm that investor sentiment exerts a larger impact on volatility connectedness in the downside market compared to the upside market.