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Tweeting through uncertainty: A convex dynamic between X-sentiment and stock illiquidity

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  • Khawaja, Mohsin

Abstract

This study investigates how social media sentiment affects stock market illiquidity. Using a textual analysis of over 12.8 million tweets published by S&P 500 companies between January 2015 and December 2022, I construct a measure of net positive sentiment from corporate tweets. My analysis reveals a nonlinear relationship between sentiment and stock illiquidity, where higher daily tweet volume scaled by sentiment is linked to a convex decline in the bid-ask spread. This relationship persists during periods of heightened economic uncertainty, although the effect size weakens. However, tweets with negative sentiment do not correlate significantly with stock illiquidity. These results are robust across different measures of illiquidity and alternative panel regressions. Overall, the findings suggest that frequent and positively framed firm disclosures are associated with lower information asymmetry and may help pacify investor sentiment during periods of economic uncertainty.

Suggested Citation

  • Khawaja, Mohsin, 2026. "Tweeting through uncertainty: A convex dynamic between X-sentiment and stock illiquidity," Research in International Business and Finance, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:riibaf:v:86:y:2026:i:c:s0275531926001108
    DOI: 10.1016/j.ribaf.2026.103383
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