Cultural buffers against social-media noise: religiosity and the sentiment–liquidity link
John García & Ran Lu-Andrews
What the paper says
Purpose This study aims to investigate whether and how local religiosity moderates the influence of investor sentiment, conveyed separately through Twitter and traditional news media, on US firms' stock liquidity. Design/methodology/approach We compile a daily panel of 1,780 US firms (2015–2021) that links tweet and news sentiment scores with county-level religiosity. Bid-ask spreads, Amihud illiquidity and turnover serve as proxies for liquidity. Fixed-effects panel regressions with Newey-West errors test the main and interaction effects. Panel Granger causality tests, alternative liquidity proxies and subsample analyses (high and/or low religiosity) gauge the robustness of the results. Findings We find that religiosity significantly moderates the adverse impact of Twitter sentiment on stock liquidity. A one-standard-deviation increase in regional religiosity reduces the bid-ask spread's sensitivity to Twitter sentiment by an economically significant 2.26 basis points (59.4% of the median bid-ask spread). In contrast, religiosity does not significantly moderate the liquidity effects of news sentiment. Furthermore, higher religiosity is directly associated with enhanced liquidity: a one-standard-deviation increase corresponds to a 0.185 basis point decrease in bid-ask spreads (approximately 4.9% of the median). These patterns hold when liquidity is measured with Amihud illiquidity or share turnover, and the panel Granger causality tests confirm the results. Originality/value This study is the first to show that local religious norms can buffer firms against liquidity shocks originating from social media sentiment. Our evidence identifies religiosity as a previously overlooked cultural risk-mitigation factor that weakens social-media-driven liquidity shocks. This advances behavioral finance theory and helps market participants develop a deeper and broader understanding of the complexities of modern financial markets.
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.50 × 0.4 = 0.20 |
| M · momentum | 0.50 × 0.15 = 0.07 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.