Investor Sentiment in Stock Market: A Case of Pakistan Super League in Pakistan Stock Exchange

This study investigates whether sentiments play any role while investors make financial decisions which results in the stock returns. The paper analyzes the major two sports events (2016-2017) of Pakistan Super League (PSL). The study utilizes the stock market data from Pakistan Stock Exchange (PSX)-100 index for the period of two financial years starting from June 2015 to July 2017. PSL T20 data is collected from the official PSL website. The empirical results of the studyshow that PSL sports events are highly statistically significant and imply that the events trigger investor sentiments (optimistic and pessimistic behaviors) in the PSX.When the whole PSL games were played on United Arab Emirates (UAE) grounds in 2016, later on, which badly affected the investor moods and resulted in a negative abnormal return in PSX-100 index. While in case of PSL event in 2017, in which only final match of the event was held in Lahore, Pakistan and resulted in a positive abnormal return in PSX-100 index. The study provides implications for different authorities such as Pakistan Cricket Board (PCB), PSX and other development authorities in order to promote such activities for the overall economic and social benefits. While founding no previous studies concerning the subject in the Pakistani context, the Scholar selected the issue to conduct a research and make a considerable contribution for investors in Pakistan with respect to PSL events and its impact on PSX. Keywords: Investor Sentiments, Stock returns, behavioral finance, Pakistan Super League, Pakistan Stock Exchange

Market Liquidity and Its Dimensions: Linking the Liquidity Dimensions to Sentiment Analysis through Microblogging Data

Market liquidity has an immediate impact on the execution of transactions in financial markets. Informed counterparty risk is often priced into market liquidity. This study investigates whether microblogging data, as a non-financial information tool, is priced along with market liquidity dimensions. The analysis is based on the Australian Securities Exchange (ASX), and from the results, we conclude that microblogging content in pessimistic periods has a higher impact on liquidity and its dimensions. On a daily basis, pessimistic investor sentiments lead to higher trading costs, illiquidity, a larger price dispersion and a lower trading volume.

COVID-19-induced Returns, Attention, Sentiments and Social Isolation: Evidence from Dynamic Panel Model

This article develops a dynamic panel model to examine the association among coronavirus outbreak, investor attention, social isolation, investor sentiments and stock returns in the German Stock exchange. The results of the two-step GMM estimator show a significant effect of coronavirus disease 2019 (COVID-19) cases on the Frankfurt Stock Exchange after controlling for calendar anomalies, meteorological conditions, country-specific factors and oil returns. Results also show that a higher level of stock returns during social isolation (lockdown period) is explained by investor attention to buy underpriced stocks. Thus, temporary social isolation enhances an investor’s ability to make better investment decisions. Investor sentiment indicators (momentum and liquidity) are also positively associated with the stock return and partially mediate the COVID-returns link, but they have no direct effect on investor attention. The stock market attracts investor attention under good news shocks (recovered cases) when investor sentiments are optimistic. Our results are robust across the transparency level of firms and their size.

Investor Sentiments and Fama–French Five-Factor Premia

This study provides new insights to predict the excess return of a security. As if factor premia are getting influenced by the sentiments that means sentiments are ultimately affecting the excess return of a security. To meet the objective, a composite index developed by Baker and Wurgler is used as sentiment proxy. Monthly data are used from July 1965 to September 2015 in U.S. context. Granger casualty, Vector Autoregression (VAR), and Fama–Macbeth regression are applied to get the results. Results show that investor sentiments significantly drive the Fama factors’ premia: size premium and profitability premium. Sentiments also contain some information to explain the investment premia but fail to explain the market risk premium and value premium. Furthermore, results suggest that sentiments increase the explanatory power of model measured by R square. In short, this study suggests that investor sentiments play a role in explaining the Fama–French five-factor premia.

COVID-Induced Investor Sentiments and Market Reaction under Extreme Meteorological Conditions: Evidence from Clean Energy Sector of Asia-Pacific

The unprecedented global economic and social crisis caused by the coronavirus outbreak has not spared the energy sector. Using a dynamic model, we investigated the effect of COVID-19 cases on investor sentiments and stock returns of clean energy in the Asian-Pacific region. The results show that coronavirus cases negatively affect stock returns using investor sentiments as a transmission channel. We also find a negative effect of air pollution on stock returns. Since COVID-19 restricted trade and plummeted the oil prices, economies relied on non-renewable sources to meet energy demands. Nevertheless, the investor’s optimism and high sentiment level may deteriorate this link. On the other hand, we do not find any significant effect of low-high temperature on either investor sentiments or clean energy stock returns. Clean energy stocks were viewed as more sustainable and less vulnerable to external shocks, however, the fear and pessimism among investors induced by corona-virus are spilled over the renewable energy sector.