Market Liquidity and Its Dimensions: Linking the Liquidity Dimensions to Sentiment Analysis through Microblogging Data

Francisco Guijarro, Ismael Moya-Clemente and Jawad Saleemi
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Francisco Guijarro: Research Institute for Pure and Applied Mathematics, Universitat Politècnica de València, 46022 València, Spain
Ismael Moya-Clemente: Faculty of Business Administration and Management, Universitat Politècnica de València, 46022 València, Spain
Jawad Saleemi: Business School, Universitat Politècnica de València, 46022 València, Spain

JRFM, 2021, vol. 14, issue 9, 1-12

Abstract: Market liquidity has an immediate impact on the execution of transactions in financial markets. Informed counterparty risk is often priced into market liquidity. This study investigates whether microblogging data, as a non-financial information tool, is priced along with market liquidity dimensions. The analysis is based on the Australian Securities Exchange (ASX), and from the results, we conclude that microblogging content in pessimistic periods has a higher impact on liquidity and its dimensions. On a daily basis, pessimistic investor sentiments lead to higher trading costs, illiquidity, a larger price dispersion and a lower trading volume.

Keywords: microblogging data; data mining; investor sentiments; asset pricing; market liquidity; liquidity dimensions (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
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