Event Sentiment and Cross-Country Herding Spillover Effects Using Machine Learning

Wei Chen; Muhammad Asim; Muhammad Yasir; Mehboob ul Hassan; Adnan Shoaib

doi:10.5755/j01.ee.36.2.36329

Authors

Wei Chen School of International Education, Zhejiang Sci-Tech University, China
Muhammad Asim Department of Management Sciences, COMSATS University Islamabad, Pakistan
Muhammad Yasir FAST School of Management, National University of Computer and Emerging Sciences, Pakistan
Mehboob ul Hassan Islamic Banking Center, Department of Economics, College of Business Administration, King Saud University, Saudi Arabia
Adnan Shoaib Greater Manchester Business School, University of Greater Manchester, Pakistan

DOI:

https://doi.org/10.5755/j01.ee.36.2.36329

Keywords:

Herding Spillover, Brexit, CSAD, Market Return, Machine Learning

Abstract

This research study investigates herding behaviour and its cross-country spillover effects in the UK, US, China, and Pakistan stock markets in the presence of event sentiment. We used three machine learning models for the empirical investigation: support vector regression, single-layer neural networks, and multi-layer neural networks. The daily data set of the listed stocks has been used. The results suggest a significant predictability of the Twitter sentiment of Brexit 2016 and COVID-19. Cross-country herding spillover is also evident from the UK to Pakistan and the US in the case of Brexit 2016. Similarly, there is a herding spillover effect from China to Pakistan and UK stock markets. The overall results of machine learning models are more significant than linear regression models. Furthermore, the event sentiment improves the performance of the machine learning models. The study provides a deep insight for individual and institutional investors to take care of unpredicted events while constructing their international portfolios in these stock markets.

Author Biographies

Wei Chen, School of International Education, Zhejiang Sci-Tech University, China

Wei Chen, Dr., is an academician currently working as a Lecturer at the School of International Education, Zhejiang Sci-Tech University, Hangzhou, China. Dr. Wei Chen has published various articles in the top-tier journals related to Economics, Finance, and Supply Chain Management.

Muhammad Asim, Department of Management Sciences, COMSATS University Islamabad, Pakistan

Muhammad Asim is a Ph.D. Scholar at the Department of Management Sciences, COMSATS University Islamabad, Wah Campus, Pakistan. Mr. Asim holds a vast experience of 15 years working at the National Bank of Pakistan. Currently, he is working as Assistant Vice President at the National Bank of Pakistan. He has published his research in the Review of Behavioural Finance.

Muhammad Yasir, FAST School of Management, National University of Computer and Emerging Sciences, Pakistan

Muhammad Yasir (Corresponding Author) holds a Ph.D. in Economics from EGE University Izmir, Turkey. He is currently employed as an Assistant Professor (Economics) at FAST School of Management, National University of Computer and Emerging Sciences, Islamabad, Pakistan since Feb 2021. His key research interests are Behavioural Finance and time series prediction using advanced econometric techniques and machine learning models.

Mehboob ul Hassan, Islamic Banking Center, Department of Economics, College of Business Administration, King Saud University, Saudi Arabia

Mehboob ul Hassan, Dr., is a full Professor in the Department of Economics, College of Business Administration, King Saud University, Riyadh, Kingdom of Saudi Arabia. He has vast teaching and research experience of over 20 years in different International Universities. He served as Associate Dean in the School of Business Administration at Al-Dar University College, UAE, from May 2013 to August 2015. Before that, he also served as Dean of Business Administration at Sindh Madressatul Islam University, Karachi, Pakistan, 2012-2013. He has published several articles in top-tier journals. ORCID: 0000-0002-3453-695X.

Adnan Shoaib, Greater Manchester Business School, University of Greater Manchester, Pakistan

Adnan Shoaib, Dr., is currently serving as an Associate Professor at Greater Manchester Business School, University of Bolton Islamabad Campus. He completed his Doctorate Degree in Finance from Bahria University Islamabad in 2017. His area of special interest is “Financial Modelling Dynamics, Investment management, International Financial Management, Data mining and Financial Econometrics.