U.S. Investor Sentiment and Financial Contagion in the Americas: Lessons From the U.S. Financial Crisis

This study investigates the influence of U.S. investor sentiment on financial contagion across the Americas during the 2008–2009 global financial crisis. Using a DCC-GARCH model, we analyze daily stock returns from Argentina, Brazil, Canada, Chile, Colombia, Mexico, Peru, and the U.S., incorporating the VIX along with individual and institutional sentiment measures. Results indicate that investor sentiment, particularly during periods of crisis, significantly increases correlations across markets, pointing to sentiment-driven spillovers. Institutional investor sentiment emerges as a strong predictor of market returns, and the findings ultimately highlight the critical role of institutional investors in amplifying financial contagion across borders.