Market sentiment and SPACs

Yom Bui and Hyoseok (David) Hwang

Applied Economics Letters, 2025, vol. 32, issue 8, 1091-1096

Abstract: This study investigates how market sentiment affects Special Purpose Acquisition Companies (SPACs). SPACs are blank-check, no-operation companies, which go public and raise money with the intention of acquiring and taking a private company public. Using hand-collected SPAC data, we find that SPAC activities grow significantly in volume and size, especially during the pandemic period of 2020–2021. Based on two market sentiment indexes, the investor sentiment (IS) and consumer confidence index (CCI), we find that SPAC activities are positively associated with market sentiment. The results remain strong and consistent even after controlling for macroeconomic conditions. Overall, we attribute our findings to investors’ willingness to invest in more speculative securities during times of high market sentiment.

Date: 2025
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DOI: 10.1080/13504851.2023.2301479

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