Abstract

The thesis comprises three essays exploring distinct aspects of market behavior influenced by external factors. The first essay studied the sentiment indexes' impact on insider trading behaviors, revealing insiders' propensity to trade against firm-specific sentiment. Notably, insiders strategically time their trades in a contrarian manner, especially concerning factors like R&D intensity and litigation risks around earnings announcements. As expected, statistically and economically insignificant associations of the sentiment proxies are found with both paper and actual dollar profits of round-trip transactions. The findings are cautiously interpreted as being consistent with the litigation-risk management of insiders by timing their trades contrarian to firm-specific sentiment and by not realizing paper profits over horizons of up to one year.
In the second essay, the focus shifts to analyzing the influence of media, particularly the Mad Money TV show, on investor attention and trading activities. The show's recommendations significantly affect institutional and retail investor attention, subsequently influencing trading volumes, short sales activities, and portfolio adjustments. The findings underscore the short-term price pressures driven by noise traders and the impact of media influencers on investor behavior and market dynamics.
The third essay explores the impact of daycare and school closures during the COVID-19 pandemic on OTC investors' trading activities. The study reveals a significant negative association between closures and local firms' trading activities, particularly affecting smaller firms with lower institutional ownership and limited geographic dispersion. This adverse effect is attributed to pandemic-induced attention diversion among local investors with children, highlighting the interconnectedness between socio-economic factors and market behaviors during unprecedented events.
Overall, these essays contribute valuable insights into understanding how sentiment indexes, media influencers like TV shows, and external socio-economic factors such as pandemic-related closures can shape investor behaviors and market outcomes.