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

Author

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  • Jaroslav Bukovina

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

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.

Suggested Citation

  • Jaroslav Bukovina, 2015. "Sentiment and blue-chip returns. Firm level evidence from a dynamic threshold model," MENDELU Working Papers in Business and Economics 2015-53, Mendel University in Brno, Faculty of Business and Economics.
  • Handle: RePEc:men:wpaper:53_2015
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    References listed on IDEAS

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    Cited by:

    1. Milla Siikanen & Kk{e}stutis Baltakys & Juho Kanniainen & Ravi Vatrapu & Raghava Mukkamala & Abid Hussain, 2017. "Facebook drives behavior of passive households in stock markets," Papers 1709.07300, arXiv.org, revised May 2018.

    More about this item

    Keywords

    Blue-chip companies; sentiment; Facebook; dynamic threshold effects;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G19 - Financial Economics - - General Financial Markets - - - Other

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