The impact of investor sentiment on the STOXX Europe 600 banks index between 2022 and April 2023

Abstract

This study explores the impact of investor sentiment on the stock returns of banks in the STOXX Europe 600 Banks Index during the Russia-Ukraine war from January 1, 2022 to April 20, 2023. Investor sentiment is measured using RUWESsent, a conflict-specific index, capturing war-related sentiment. Employing a random effects panel data model, the analysis finds that overall investor sentiment had a statistically significant but modest negative effect on bank returns. When sentiment is disaggregated, war- and sanction-related sentiment exhibited positive effects, potentially reflecting investor confidence in institutional responses. In contrast, media-driven sentiment had a negative influence, amplifying the role of public attention during crises. Country-level analysis revealed heterogeneity in sentiment effects, with weaker sentiment responses in less speculative markets. These findings support behavioral finance perspectives on the influence of sentiment during crises, emphasizing the conditional nature of its impact depending on the source of sentiment and market context.

Date of Award	21 Oct 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Mário Pedro Ferreira (Supervisor)