STABILITY IN CHAOS: IMPACT OF MONETARY, FISCAL, AND FIRM CHARACTERISTICS ON INVESTOR SENTIMENT IN ASIAN EMERGING MARKETS

Abstract

This study investigates the impact of firm characteristics, monetary policies, and fiscal policies on investor sentiment, specifically focusing on market volatility and trading volume in six Asian emerging markets during the pre-pandemic and pandemic periods. Using panel data regression on a sample of 5,619 firms between 2015 and 2023, this study analyses the distinct roles of firm-specific factors and macroeconomic policies in shaping market behaviour during periods of economic instability. The findings reveal that firm characteristics such as capital structure and payout policies consistently drive both volatility and trading volume. Monetary policies, particularly interest rates and money supply, showed heightened significance during the pandemic, while fiscal policies, though largely insignificant pre-pandemic, became more relevant during the crisis. The study's results provide critical insights for policymakers and investors on the dynamic interplay between firmlevel and macroeconomic factors during crisis periods, emphasising the need for coordinated policy responses.