Political-obsessed environment and investor sentiments: pricing liquidity through the microblogging behavioral perspective

Abstract

<abstract> <p>Pakistan's political instability has pushed its economic system to the brink of collapse. Considering this political turmoil, this study addresses the behavior of liquidity providers against microblogging-opinionated information. The behavioral perspective was quantified through multiple linear regressions, the Bayesian theorem, and the vector error correction technique. Before this political crisis, sentiment indicators were linked to the liquidity-conditional cost for the same trading session. In the political uncertainty environment, pessimistic opinions were the sole concern of the liquidity providers during the same trading session. The liquidity facilitator was observed to price the liquidity in light of pessimistic sentiments. The Bayesian theorem suggested a higher posterior probability for the occurrence of the liquidity-facilitating cost in response to the pessimistic sentiments. Nevertheless, the past time series changes for the sentiment indicators were irrelevant in determining changes in cost-based liquidity for the next trading session.</p> </abstract>