IMPACT OF PUBLIC TRUST IN U.S. FINANCIAL INSTITUTIONS ON GLOBAL STOCK MARKET RETURNS

Public trust in financial institutions is crucial for determining the value of securities.This study examines how new macroeconomic indicators that capture public trust in U.S. financial institutions impact stock markets in North America, Latin America, Europe, Asia, the Gulf Cooperation Council (GCC), Africa, and major emerging economies.We employ five distinct indicators that measure public trust levels in commercial banks, mutual funds, stock markets, large corporations, and overall financial trust, and investigate their relative impact on 21 international stock market indexes.The results suggest that three out of the five financial trust indicators significantly impact U.S. and international stock market returns, with varying degrees of strength.Specifically, the financial trust index, public trust in large corporations, and public trust in commercial banks significantly affect global markets, while trust in stock markets and mutual funds are insignificant.The financial trust index has the maximum impact and affects stock markets in economies with strong trade links to the U.S., such as Canada, the U.K., China, and Mexico.Similarly, public trust in large corporations significantly impacts stock markets in manufacturing countries like Canada, China, the U.K., Germany, France, Spain, and GCC economies.On the other hand, public trust in commercial banks affects the stock markets of economies with strong financial services industries, such as China, the U.K., Switzerland, Germany, Hong Kong, and South Korea.These findings suggest that financial trust is a critical factor in valuing securities in international markets, making it an additional risk factor that is priced in global markets.Understanding these dynamics can enhance market stability, improve investor confidence, and foster sustainable global economic growth.