Quantile connectedness between social network sentiment and sustainability index volatility: Evidence from the Moroccan financial market¹

The goal of this paper is to investigate the connectedness between investor sentiment and volatility on the environmental, social, and governance index (ESG) in Morocco. Therefore, on the basis of an investor sentiment index constructed from the X platform, and using quantile and frequency connectedness approaches, the findings reveal a significant connectedness between sentiment and ESG volatility, particularly during turbulent events. Although sentiment acts most of the time as a net receiver of shocks, notably during the COVID-19 pandemic and geopolitical crises, it sometimes becomes a net sender of shocks. Furthermore, the spillovers between sentiment and ESG volatility are determined mainly by the long-term component, especially during extreme events, implying the persistence of shock transmission due to high uncertainty. The results also illustrate the impact of market conditions on the spillovers between sentiment and ESG volatility. The conclusions of this study provide useful guidance for pro-ESG investors, policymakers, and companies.