Abstract: The impact of investor sentiment on economic activities is crucial. Based on the quarterly and annual unbalanced panel data of 64 countries from 2000 to 2020, this paper studies the impact of investor sentiment on economic growth and sovereign debt defaults. The findings show that countries with more optimistic investor sentiment are more likely to experience slower economic growth and sovereign debt defaults, especially those countries with huge current account deficits; and the investor sentiment is potentially asymmetrical, excessive optimism will significantly increase the default amount proportion and the default probability of sovereign countries. The results of the mechanistic analysis show that overly optimistic investor sentiment can affect a country's economic situation by accumulating large amounts of debt and reducing investment. Therefore, under the current external environment, sovereign countries should pay more attention to the fundamental information when making investments and financing, use external capital prudently, continue to strengthen supervision, and prevent the accumulated risks due to excessive optimism.

Key words: investor sentiment, sovereign debt default, economic growth, excessive optimism