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Sentiment of a society and large-cap stock liquidity

Jaroslav Bukovina ()
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Jaroslav Bukovina: Department of Finance, Faculty of Business and Economics, Mendel University in Brno

No 2015-56, MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics

Abstract: The impact of sentiment in the sample of small and young companies due to higher transaction and information costs is a generally agreed notion. On the contrary, such impact is less likely in the sample of large-cap stock companies. However, this paper goes beyond this notion and shows that we can study the influence of sentiment even at the level of large-cap companies due to the following reasons. Firstly, the paper is unique by employment of social media Facebook data as a proxy for the sentiment of a society related to the individual corporation. Such data have a potential to provide deeper insights in a society's behavior. Secondly, the author proposes the volume of trade or liquidity as a variable which incorporates sentiment in a society better than stock returns. Empirical results confirm this prediction. Overall, the paper shows the existence of the negative link between sentiment in the society and volume of trade at the level of large-cap corporations.

Keywords: Sentiment of a society; liquidity; Facebook activity; quantile regression (search for similar items in EconPapers)
JEL-codes: G14 G19 (search for similar items in EconPapers)
Date: 2015-11
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