Can Stock Investor Sentiment Be Contagious in China?

Round 1

Reviewer 1 Report

Dear Authors,

Please find attached the document Review Report Form which I have prepared for your paper entitled “Can Stock Investor Sentiment Be Contagious in China?”, Journal: Sustainability (ISSN 2071-1050), Manuscript ID: sustainability-723536, Type: Article.

I wish you good luck with your work!

Kind regards,

The Reviewer

 

Comments for author File: Comments.pdf

Author Response

Reply to the reviewer 1

I have carefully analyzed your article entitled “Can Stock Investor Sentiment Be Contagious in China?”. Congratulations for your work and valuable insights reflected in the content of the manuscript!

The structure of my Review Report Form takes into consideration two sections, namely: (A.) General overview of the article and strong points; and (B) Suggestions meant to improve your current manuscript.

(B)Suggestions meant to improve your current manuscript:

• First of all, I would kindly suggest making a correlation between investments, performance, economic growth and excellence models, since investments, performance and excellence are three valuable targets for any business and any economy these days. I took the opportunity, in this regard, to make below a bibliographical suggestion, as a starting point: Response: Thank you so much for your comments.

 

1. In order to indicate the correlation between investments, performance, economic growth and excellence models, we have added some discussions as follows:
2. Popescu, C.R., Popescu, G.N. and Popescu, V.A.. Assessment of the State of Implementation of Excellence Model Common Assessment Framework (CAF) 2013 by the National Institutes of Research – Development – Innovation in Romania. Amfiteatru Economic 2017, 19(44), pp. 41-60, Accession Number: WOS: 000395746900004, ISSN: 1582-9146, eISSN: 2247-9104, link: https://www.amfiteatrueconomic.ro/RevistaDetalii_EN.aspx?Cod=1063.

In Page 5-6 Lines 213-230: In addition, we also summarize the roles of some external factors in the interaction mechanism between stock investor sentiment and market returns. Changes in policies and regulations alter investors' perspectives of market trends and their investment behavior (Hirshleifer, 2015). The authorities assess the efficiency of regulations and make adjustments according to market performance and the criterion of some excellence models (Popescu et al., 2017). Recognizing the importance and advantages of social responsibility and of sustaining market efficiency in increasing profits, productivity and performance, many organizations and individuals make their investment at the level of social responsibility. This reduces the emergence of extreme investment sentiments and decreases market fluctuations (Wang et al., 2011; Popescu, 2017). A slowdown in economic growth can lead to pessimistic expectation of investors about the future and overreaction to their investment behavior which cause market fluctuations (Dimson et al., 2004). Moreover, the cultural traits of different regions potentially have an influence on investor sentiment and lead to market changes. Conservative personality and investment style may be more prone to pessimism (Aggarwal et al., 2012). Figure 1 shows these external factors in the interaction mechanism between stock investor sentiment and market returns.

Figure 1. External factors in the interaction mechanism between stock investor sentiment and market returns

In Page 11 Lines 427-431: Because of the aforementioned links between stock market investor sentiment and different financial markets, sustainable market efficiency in some excellence models can not be realized simply by implementation of management systems. In order to ensure the favourable investment environment and aviod the drastic fluctuations of markets, all segments of the society (regulators, corporates, individuals, etc.) should make efforts to achieve their own patterns of excellence.

•  

References

• Popescu, C. R. The Role of Total Quality Management in Developing the Concept of Social Responsibility to Protect Public Interest in Associations of Liberal Professions. Amfiteatru Economic,2017, 19, 1091-1106.
• Popescu, C. R., Popescu, G. N., and Popescu, V. A. Assessment of the State of Implementation of Excellence Model Common Assessment Framework (CAF) 2013 by the National Institutes of Research–Development–Innovation in Romania.Amfiteatru Economic,2017, 19, 41-60.

 

• Second of all, I would kindly suggest making a correlation between investments and financial markets’ drastic fluctuations in developing the concept of social responsibility. I took the opportunity, in this regard, to make below a bibliographical suggestion, as a starting point:

 

1. Popescu, C.R.G.; Popescu, G.N. An Exploratory Study Based on a Questionnaire Concerning Green and Sustainable Finance, Corporate Social Responsibility, and Performance: Evidence from the Romanian Business Environment. J. Risk Financial Manag. 2019, 12, 162. DOI: 10.3390/jrfm12040162, link: https://www.mdpi.com/1911-8074/12/4/162.

Response: Thank you so much for your comments.

We have added some discussion of investments and financial markets’ drastic fluctuations to our paper as follows:

In Page 1-2 Lines 43-49: Although many organizations and individuals operate at the level of social responsibility, recognizing the importance and advantages of social responsibility and of sustaining market efficiency in increasing profits, productivity and performance (Popescu and Popescu, 2019), they tend to be sustainable by maintaining financial secure or minimizing negative environmental impacts (Lagoarde-Segot, 2019). Especially in certain extreme pessimistic situations, sentiment in stock market can lead other financial markets' drastic fluctuations (Jouinia and Napp, 2010) and the authorities cannot maintain market stability and continuity of development.

In Page 2 Lines 60-62: Lacking of social responsibility and awareness of sustaining market efficiency, Chinese individual investors have underdeveloped investment education and thus they often make irrational investment behaviours (Wang et al., 2011).

In Page 5-6 Lines 213-230: In addition, we also summarize the roles of some external factors in the interaction mechanism between stock investor sentiment and market returns. Changes in policies and regulations alter investors' perspectives of market trends and their investment behavior (Hirshleifer, 2015). The authorities assess the efficiency of regulations and make adjustments according to market performance and the criterion of some excellence models (Popescu et al., 2017). Recognizing the importance and advantages of social responsibility and of sustaining market efficiency in increasing profits, productivity and performance, many organizations and individuals make their investment at the level of social responsibility. This reduces the emergence of extreme investment sentiments and decreases market fluctuations (Wang et al., 2011; Popescu, 2017). A slowdown in economic growth can lead to pessimistic expectation of investors about the future and overreaction to their investment behavior which cause market fluctuations (Dimson et al., 2004). Moreover, the cultural traits of different regions potentially have an influence on investor sentiment and lead to market changes. Conservative personality and investment style may be more prone to pessimism (Aggarwal et al., 2012). Figure 1 shows these external factors in the interaction mechanism between stock investor sentiment and market returns.

Figure 1. External factors in the interaction mechanism between stock investor sentiment and market returns

In Page 11 Lines 429-431: In order to ensure the favourable investment environment and aviod the drastic fluctuations of markets, all segments of the society (regulators, corporates, individuals, etc.) should make efforts to achieve their own patterns of excellence.

 

References

• Lagoarde-Segot, T. Sustainable finance. A critical realist perspective.Research in International Business and Finance, 2019,47, 1-9.
• Popescu, C. R., Popescu, G. N., and Popescu, V. A. Assessment of the State of Implementation of Excellence Model Common Assessment Framework (CAF) 2013 by the National Institutes of Research–Development–Innovation in Romania.Amfiteatru Economic,2017, 19, 41-60.
• Popescu, C. R. G., and Popescu, G. N. An exploratory study based on a questionnaire concerning green and sustainable finance, corporate social responsibility, and performance: Evidence from the Romanian business environment.Journal of Risk and Financial Management, 2019, 12, 162.
• Wang, M., Qiu, C., and Kong, D. Corporate social responsibility, investor behaviors, and stock market returns: Evidence from a natural experiment in China.Journal of Business Ethics,2011, 101, 127-141.

 

 

Author Response File: Author Response.docx

Reviewer 2 Report

Dear Editor, Dear Authors,

thanks for letting me review this paper, which I found very interesting.

Before make it published, I have some minor concerns that I suggest to address in a revised version.

Overall, I think that the paper is in its final stage of writing so it only needs some minor revisions that can be summarized as follows:

• kindly better contextualize it in order to adhere to the aims and scope of the journal. Why did you choose to submitting it to "Sustainability"?
• the conclusion section should also contain some more discussion of your results. Please also provide information about the shortcomings of your study, and directions for further research.

Minor language revision is also suggested.

Best of luck

Author Response

Reply to the reviewer 2

Thanks for letting me review this paper, which I found very interesting.

Before make it published, I have some minor concerns that I suggest to address in a revised version.

Overall, I think that the paper is in its final stage of writing so it only needs some minor revisions that can be summarized as follows:

• Kindly better contextualize it in order to adhere to the aims and scope of the journal. Why did you choose to submitting it to "Sustainability"?In order to indicate the reason why we choose to submitting it to "Sustainability", we have supplement some parts of the paper as follows:In Page 1-2 Lines 43-47: Although many organizations and individuals operate at the level of social responsibility, recognizing the importance and advantages of social responsibility and of sustaining market efficiency in increasing profits, productivity and performance (Popescu and Popescu, 2019), they tend to be sustainable by maintaining financial secure or minimizing negative environmental impacts (Lagoarde-Segot, 2019).

 

1. In Page 1 Lines 19-20: Hence, the authorities can sustain the stabilization of financial markets by reducing information asymmetry, guiding rational sentiment of investors and increasing effective regulations.
2. Response: Thank you so much for your comments.

In Page 2 Lines 74, 77-78: Regulators will confront more difficulties in sustaining markets efficiency and stability. Combining aforementioned factors, we attempt to study examine the relationship between the investor sentiment in stock market and other financial markets, including bond, gold and foreign exchange market, in order to provide helpful analysis for the authorities to maintain efficiency and stability of markets.

In Page 11 Lines 427-429: Because of the aforementioned links between stock market investor sentiment and different financial markets, sustainable market efficiency and economic growth in some excellence models can not be realized simply by implementation of management systems (Popescu et al., 2017).

In Page 12 Lines 460-461: Hence, guiding rational sentiment of stock investors on other markets can be conducive to sustain the effectiveness of the financial markets in China.

 

References

Lagoarde-Segot, T. Sustainable finance. A critical realist perspective. Research in International Business and Finance, 2019, 47, 1-9.

• Popescu, C. R., Popescu, G. N., and Popescu, V. A. Assessment of the State of Implementation of Excellence Model Common Assessment Framework (CAF) 2013 by the National Institutes of Research–Development–Innovation in Romania.Amfiteatru Economic,2017, 19, 41-60.
• Popescu, C. R. G., and Popescu, G. N. An exploratory study based on a questionnaire concerning green and sustainable finance, corporate social responsibility, and performance: Evidence from the Romanian business environment.Journal of Risk and Financial Management, 2019, 12, 162.

 

• The conclusion section should also contain some more discussion of your results. Please also provide information about the shortcomings of your study, and directions for further research.We have added some discussion of our results, the shortcomings of our study and directions for further research in "Conclusion" part as follows:In Page 12 Lines 465-470: To summarize, to explore whether different levels of stock investor sentiment have an impact on other markets (e.g., stock investor sentiment and cryptocurrency market), not necessarily in the case of China, serves as a continuous stimulus for future studies. Moreover, we should consider whether the time-varying effects of stock investor sentiment exists in these markets, which this paper does not examine. These further works can help comprehensively capture the relationship between stock investor sentiment and different markets.

 

1. In Page 11-12 Lines 447-458: Due to the investor heterogeneity and similar risk exposure with stock, CB manifests no significant link with IS. The relationship with IS also shows multiformity among other three markets. The asymmetry effect of IS on GT can be attributed to gold's counter-cyclical nature and weakened the role of safe haven in optimistic periods. IS have an impact on GB when IS is at the extremes. This phenomenon can be explained by the evidence of short-term capital flow and expectation of future interest rate orientation. ER can be influenced when IS is extremely optimistic and pessimistic. This result is ascribed to the trend of liberalisation of foreign exchange market, the international capital flow and arbitrageurs. We conclude that stock market sentiment, as an insidious factor, impacts the stability and efficiency of other financial markets. Conversely, GB, CB and ER also have an influence on IS when these markets face extreme optimistic or pessimistic situations. The information from these markets might be over-interpreted by fickle investors. The wane and wax of major financial markets can affect stock market investors' expectations and thus affect their investment behaviours.
2. Response: Thank you so much for your comments.

 

Author Response File: Author Response.docx

Round 2

Reviewer 1 Report

Dear Authors,

Congratulation for your work and for the final version of your Article "Can Stock Investor Sentiment Be Contagious in China?". I wish you good luck with your current and future work!

Kind regards,

The Reviewer