The Impact of Economic Agents Perceptions on Stock Price Volatility

• Main Author: Jaroslav Bukovina
• Format: Article
• Language: English
• Published: Mendel University Press 2015-01-01
• Series: Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis
• Subjects: perceptions of economic subjects; Facebook activity; social networks; overreaction on negative news
• Online Access: https://acta.mendelu.cz/63/4/1229/

This paper studies perceptions of economic subjects and its impact on stock prices. Perceptions are represented by stock market indexes and Facebook activity. The contribution of this paper is twofold. In the first place, this paper analyzes the unique data of Facebook activity and proposes the methodology for employment of social networks as a proxy variable which represents the perceptions of information in society related to the specific company. The second contribution is the proposal of potential link between social network principles and theories of behavioral economics. Overall, the author finds the negative impact of Facebook activity on stock prices and the positive impact of stock market indices. The author points the implications of findings to protection of company reputation and to investment strategy based on the existence of undervalued stocks.