Open Access Journal Article

Economic Unrest and Investment Perspective on Liquidity in relation to the Investor Sentiments

by Jawad Saleemi a,* orcid
a
Business School, Universitat Politècnica de València, València, Spain
*
Author to whom correspondence should be addressed.
FEL  2023 2(2):15; https://doi.org/10.58567/fel02020005
Received: 17 September 2023 / Accepted: 31 October 2023 / Published Online: 9 November 2023
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Abstract

Liquidity and its associated issues are one of dominant strands in the market microstructure. In this study, microblogging-based behavioral perspective on economic unrest is linked to the market liquidity. The concept of liquidity is examined in terms of price dispersion relative to the quantity traded. The analysis contains the quantification of multiple linear regression, Gaussian distribution technique, and vector error correction methodology. In the economic stability period, the investor’s mood, either in positive manner or pessimistic context, had an influential role on the price impact volume-based liquidity. Meantime, the probability was higher for occurrence of price impact volume-based liquidity in response to the sentiment indicators. In the economic unrest environments, the positive bias investor’s mood was not vigorous enough to influence the dispersion of asset’s prices and trading quantity. Most importantly, the negative bias investor’s emotion was linked to increase the dispersion of asset’s prices relative to the quantity traded. Investors with a lower amount of trading quantity had declined the liquidity in the market. Additionally, there was a higher probability for occurrence of illiquidity in the pessimistic market periods. However, changes in past sentiment series were not associated with changes in pervious liquidity series, either in short run or long run. The findings may be potentially applicable to manage the behavioral perspective of liquidity risk.

Keywords: Economic crisis; Behavioral analysis; Microblogging-opinionated data; Financial market liquidity;
Copyright: © 2023 by Saleemi. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
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ACS Style
Saleemi, J. Economic Unrest and Investment Perspective on Liquidity in relation to the Investor Sentiments. Financial Economics Letters, 2023, 2, 15. https://doi.org/10.58567/fel02020005
AMA Style
Saleemi J. Economic Unrest and Investment Perspective on Liquidity in relation to the Investor Sentiments. Financial Economics Letters; 2023, 2(2):15. https://doi.org/10.58567/fel02020005
Chicago/Turabian Style
Saleemi, Jawad 2023. "Economic Unrest and Investment Perspective on Liquidity in relation to the Investor Sentiments" Financial Economics Letters 2, no.2:15. https://doi.org/10.58567/fel02020005
APA style
Saleemi, J. (2023). Economic Unrest and Investment Perspective on Liquidity in relation to the Investor Sentiments. Financial Economics Letters, 2(2), 15. https://doi.org/10.58567/fel02020005

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