Does Optimistic Investor Sentiment Accelerate Taiwan Stock Market Liquidity?

Wan-Ru Yang () and Ming-Che Chuang ()
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Wan-Ru Yang: National University of Kaohsiung
Ming-Che Chuang: Feng Chia University

Asia-Pacific Financial Markets, 2025, vol. 32, issue 3, No 7, 953-974

Abstract: Abstract This article explores whether the bullish sentiment of retail and institutional investors increases Taiwan stock market liquidity as measured by the Amihud index. We find that optimistic retail investor sentiment increases market liquidity risk and that the impact of institutional investor sentiment on market liquidity is insignificant. Retail investors’ irrational sentiment is also critical to Taiwan’s market liquidity. The bullish sentiment of retail investors makes stocks with high liquidity risk more illiquid. Moreover, for different liquidity-level portfolios, the influence of retail investor sentiment on stock liquidity is greater than institutional investor sentiment.

Keywords: Investor sentiment; Liquidity risk; Irrational sentiment (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10690-024-09476-5

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