Previous research finds correlation between sentiment and future economic growth, but disagrees on the mechanism that explains this result. In this paper, we shed new light on this issue by exploiting cross-country variation in sentiment and market efficiency. We find that sentiment shocks in G7...

Previous research finds correlation between sentiment and future economic growth, but disagrees on the channel that explains this result. In this paper, we shed new light on this issue by exploiting cross-country variation in sentiment and market efficiency. We find that sentiment shocks in G7...