Firm-specific investor sentiment and stock price crash risk

Junhui Fu, Xiang Wu, Yufang Liu and Rongda Chen

Finance Research Letters, 2021, vol. 38, issue C

Abstract: This study investigates the impact of firm-specific investor sentiment on stock price crash risk. To achieve this goal, we first develop a firm-specific investor sentiment index. Based on the sentiment index, we conduct empirical tests and find that there is a significant positive relationship between firm-specific investor sentiment and stock price crash risk. This finding holds after a series of robustness checks including different measures of crash risk, the winsorization of some variables, and the inclusion of some omitted variables. Further analyses show that the positive relationship is more pronounced for firms with worse liquidity.

Keywords: Stock price crash risk; Firm-specific investor sentiment; Liquidity (search for similar items in EconPapers)
JEL-codes: G1 G3 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319308013

DOI: 10.1016/j.frl.2020.101442

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