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Firm-specific investor sentiment and stock price crash risk

Author

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  • Fu, Junhui
  • Wu, Xiang
  • Liu, Yufang
  • Chen, Rongda

Abstract

This study investigates the impact of firm-specific investor sentiment on stock price crash risk. To achieve this goal, we first develop a firm-specific investor sentiment index. Based on the sentiment index, we conduct empirical tests and find that there is a significant positive relationship between firm-specific investor sentiment and stock price crash risk. This finding holds after a series of robustness checks including different measures of crash risk, the winsorization of some variables, and the inclusion of some omitted variables. Further analyses show that the positive relationship is more pronounced for firms with worse liquidity.

Suggested Citation

  • Fu, Junhui & Wu, Xiang & Liu, Yufang & Chen, Rongda, 2021. "Firm-specific investor sentiment and stock price crash risk," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319308013
    DOI: 10.1016/j.frl.2020.101442
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    More about this item

    Keywords

    Stock price crash risk; Firm-specific investor sentiment; Liquidity;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G3 - Financial Economics - - Corporate Finance and Governance

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