Unveiling the Nexus Between Crises, Investor Sentiment, and Volatility of Tourism-Related Stocks: Empirical Findings From Pakistan

Aziz Ullah, He Biao and Assad Ullah

SAGE Open, 2024, vol. 14, issue 3, 21582440241256236

Abstract: This study investigates the predictive power of sentiment metrics concerning the volatility of tourism-related stocks listed on the Pakistan Stock Exchange (PSX) during recent crises. We employed univariate and multivariate GARCH-family econometric models to analyze daily data collected from March 2020 to April 2023. The data is categorized into two periods: A (COVID-19 until February 2022) and B (the vote of no-confidence motion until April 2023). The findings indicate that Market Sentiment (MS) plays a more significant role than individual sentiment in predicting stock price volatility and negatively impacts return volatility. During period A, the Fear Index (FI) and in B, economic policy uncertainty (EPU) were identified as factors contributing to increased fluctuation in tourism-related stocks. Additionally, MS exhibited a heightened level of bearishness compared to the COVID-19 era. The multivariate BEKK-GARCH analysis revealed that MS past volatility negatively spillover onto the current conditional volatility of PSX firms. This highlights the paramount importance of MS in understanding stock price fluctuations in the PSX. Interestingly, the technology sector exhibited lower sensitivity across the analysis. This study provides valuable insights for decision-makers by elucidating the principles of behavioral finance theory within the context of the PSX. They should prioritize long-term strategies to institutionalize investors, enhance their emotional intelligence, and mitigate psychological biases in the market.

Keywords: tourism industry; investor sentiment; volatility; behavioral finance; GARCH family models (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:14:y:2024:i:3:p:21582440241256236

DOI: 10.1177/21582440241256236

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