The effect of investor sentiment on stock market liquidity under changing market conditions: evidence from South Africa
The impact of investor sentiment on liquidity is profound during changing market conditions, as empirical evidence has shown that market fluctuations often trigger spikes or declines in trading volumes which have unanticipated effects on liquidity. Therefore, this study examined the time-varying eff...
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| Format: | Article |
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Taylor & Francis Group
2025-12-01
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| Series: | Cogent Economics & Finance |
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| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2024.2444395 |
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| author | Thiasha Naidoo Peter Moores-Pitt Paul-Francois Muzindutsi |
| author_facet | Thiasha Naidoo Peter Moores-Pitt Paul-Francois Muzindutsi |
| author_sort | Thiasha Naidoo |
| collection | DOAJ |
| description | The impact of investor sentiment on liquidity is profound during changing market conditions, as empirical evidence has shown that market fluctuations often trigger spikes or declines in trading volumes which have unanticipated effects on liquidity. Therefore, this study examined the time-varying effect of investor sentiment on stock market liquidity in South Africa, and employed the QARDL model to analyse monthly data and market liquidity from January 2000 to December 2023. The empirical findings indicated that investor sentiment has a short-run impact on liquidity as the market moves from bearish to bullish conditions, whilst the long-run effects are significant in a steady condition in addition to bullish and bearish market environments. The results revealed an asymmetric and quantile dependent effect of investor sentiment on stock market liquidity where investors are more pessimistic when the market is bearish, leading to decreasing liquidity. Overall, the results of this study supported the theoretical assumption that optimistic investor sentiment boosts the liquidity of the stock market whereas pessimism amongst investors decreases overall liquidity. |
| format | Article |
| id | doaj-art-51df34a28f4a4c8da91252b1204bc7c1 |
| institution | Kabale University |
| issn | 2332-2039 |
| language | English |
| publishDate | 2025-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj-art-51df34a28f4a4c8da91252b1204bc7c12024-12-30T06:41:23ZengTaylor & Francis GroupCogent Economics & Finance2332-20392025-12-0113110.1080/23322039.2024.2444395The effect of investor sentiment on stock market liquidity under changing market conditions: evidence from South AfricaThiasha Naidoo0Peter Moores-Pitt1Paul-Francois Muzindutsi2School of Accounting, Economics and Finance, University of KwaZulu-Natal, Durban, South AfricaSchool of Accounting, Economics and Finance, University of KwaZulu-Natal, Durban, South AfricaSchool of Accounting, Economics and Finance, University of KwaZulu-Natal, Durban, South AfricaThe impact of investor sentiment on liquidity is profound during changing market conditions, as empirical evidence has shown that market fluctuations often trigger spikes or declines in trading volumes which have unanticipated effects on liquidity. Therefore, this study examined the time-varying effect of investor sentiment on stock market liquidity in South Africa, and employed the QARDL model to analyse monthly data and market liquidity from January 2000 to December 2023. The empirical findings indicated that investor sentiment has a short-run impact on liquidity as the market moves from bearish to bullish conditions, whilst the long-run effects are significant in a steady condition in addition to bullish and bearish market environments. The results revealed an asymmetric and quantile dependent effect of investor sentiment on stock market liquidity where investors are more pessimistic when the market is bearish, leading to decreasing liquidity. Overall, the results of this study supported the theoretical assumption that optimistic investor sentiment boosts the liquidity of the stock market whereas pessimism amongst investors decreases overall liquidity.https://www.tandfonline.com/doi/10.1080/23322039.2024.2444395Investor sentimentstock market liquidityQARDL modelmarket conditionsSouth AfricaEconomics |
| spellingShingle | Thiasha Naidoo Peter Moores-Pitt Paul-Francois Muzindutsi The effect of investor sentiment on stock market liquidity under changing market conditions: evidence from South Africa Cogent Economics & Finance Investor sentiment stock market liquidity QARDL model market conditions South Africa Economics |
| title | The effect of investor sentiment on stock market liquidity under changing market conditions: evidence from South Africa |
| title_full | The effect of investor sentiment on stock market liquidity under changing market conditions: evidence from South Africa |
| title_fullStr | The effect of investor sentiment on stock market liquidity under changing market conditions: evidence from South Africa |
| title_full_unstemmed | The effect of investor sentiment on stock market liquidity under changing market conditions: evidence from South Africa |
| title_short | The effect of investor sentiment on stock market liquidity under changing market conditions: evidence from South Africa |
| title_sort | effect of investor sentiment on stock market liquidity under changing market conditions evidence from south africa |
| topic | Investor sentiment stock market liquidity QARDL model market conditions South Africa Economics |
| url | https://www.tandfonline.com/doi/10.1080/23322039.2024.2444395 |
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