This article examines the impact of local and global investor sentiment on stock market liquidity using data from an order‐driven emerging market. Along with four different liquidity proxies, the empirical analysis uses one domestic investor sentiment index and four global sentiment proxies that represent investor sentiment of United States, Europe, and aggregate emerging market sentiment. Granger‐causality test results suggest that investor sentiment significantly Granger‐causes stock market liquidity. We also find that investor sentiment is an essential determinant of stock market liquidity and the impact of global investor sentiment persists even after controlling local sentiment. The empirical findings are robust across different sample periods and liquidity measures.
|Publisher||Data powered by TypesetWiley|