Asymmetric impact of social media sentiments and stock market uncertainty on Indian sectoral returns: A quantile-on-quantile approach

The study investigates the impact of social media sentiments and stock market uncertainty on Indian sectoral returns during various market conditions. We use the daily returns of eleven sectors and social media sentiments, including the Optimism Index (OI) and Pessimism Index (PI), as well as the stock market uncertainty (VIX) over the period from 2011 to 2022. Instead of employing a mean-based approach, we employ nonparametric quantile-based techniques. Specifically, the findings from both quantile regression (QR) and quantile-on-quantile regression (QQR) (Sim & Zhou, 2015) indicate that (i) OI shows a positive (negative) relationship with sectoral returns across the bullish (bearish) periods in information technology, metal, auto, energy, realty, oil & gas, and financial sectors, (ii) PI consistently shows a strong (weak) negative relationship with all the sectors across the bearish (bullish) periods except healthcare and pharma, and (iii) VIX indicates an asymmetrically negative relationship with sectoral returns across all market conditions in all the sectors. Moreover, OI and PI have negligible impact on the healthcare and pharma sectors. Our findings hold substantial importance for investors and policymakers.