Sentiment and blue-chip returns. Firm level evidence from a dynamic threshold model

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Jaroslav Bukovina (jaroslav.bukovina@mendelu.cz)
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No 2015-53, MENDELU Working Papers in Business and Economics from  Mendel University in Brno, Faculty of Business and Economics

Abstract: The higher impact of sentiment on small and young companies due to higher transaction and information costs is a generally agreed notion. In contrast, the paper is focused on the relationship between sentiment and blue-chip stocks. The author contributes with the proposal of theoretical background that blue-chip stocks can reflect sentiment in periods of occasional excessive social activity despite the existence of smart-money investors. The author employs the appropriate empirical methods, specifically dynamic threshold model, to analyze such a relationship because standard regression is not appropriate. In addition, the paper contribution is the employment of unique data of Facebook activity as a sentiment gauge. Overall, the author finds the high level of social activity connected with negative sentiment with inverse but occasional influence at stock price returns.

Keywords: Blue-chip companies; sentiment; Facebook; dynamic threshold effects(search for similar items in EconPapers)
JEL-codes: G14 G19 (search for similar items in EconPapers)
Date: 2015-06
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