The Stock Trading Behavior of Small and Neglected Firms using Multi Order Social Sentiment Markov Chains

Kim Kwansoo, Sang-Yong Tom Lee, Imed Boughzala

Research output: Contribution to conferencePaperResearchpeer-review


A persuasive argument is that small cap stocks outperform large cap stocks. A technological advance mirroring social belief paves the way for individual traders to take advantage in financial markets. We examine if and how investors’ social response towards the small and neglected stocks will be communicated to their stock trading behavior. We use multi order hidden Markov process performing experiments in stock trading channels and perform nested ANOVA to identify the differentiated impact of social sentiment on the firm cohorts, well known vs. less known. We show that a second order Markov chain might better performs for the predictive interaction, implying the presence of speculative prediction, which is difficult with just a first order chain. An interesting result is that investors’ social belief and response is transferred to the stock trading behavior of small and neglected firms when they sell the stocks, referring the small and neglected firm effects.
Original languageEnglish
Publication date2020
Publication statusPublished - 2020
Externally publishedYes


  • Size effect
  • Neglected firm effect
  • Stock trading behavior
  • Social sentiment
  • Markov chains
  • Nested ANOVA analysis

Cite this