Happiness and IPO performance

Konpanas Dumrongwong and Suwongrat Papangkorn

Journal of Behavioral and Experimental Finance, 2025, vol. 46, issue C

Abstract: This study investigates the relationship between investor sentiment and stock market performance using a novel approach: the X-based happiness index. Analyzing U.S. firms from 2008 to 2023, we employ both ordinary least squares (OLS) and quantile regression techniques to examine potential nonlinear relationships. While OLS results show a positive association between happiness and returns, our quantile regression analysis reveals a more nuanced relationship: the positive correlation is present across all quantiles but achieves statistical significance exclusively in the upper quantile. This asymmetric effect suggests that happiness exerts its strongest influence during periods of high returns, with tests confirming that the effect in the highest quantile significantly differs from other market conditions. Our findings contribute to behavioral finance literature by demonstrating how social media-derived sentiment measures can capture market dynamics missed by traditional indicators, suggesting investors should pay particular attention to happiness indicators during strong market performance.

Keywords: Initial public offerings; Initial returns; IPO Underpricing; Behavioral Finance; Market Sentiment; Sentiment Indicator (search for similar items in EconPapers)
JEL-codes: G12 G14 G41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:46:y:2025:i:c:s2214635025000255

DOI: 10.1016/j.jbef.2025.101044

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