Digital Customer Sentiment and Its Predictive Power for Stock Market Movements in Pakistan

Abstract

The development of digital space has altered the process of forming and disseminating information, opinions, and emotions within financial markets, particularly in emerging economies. It is based on Behavioral Financial Theory and Investor Sentiment Theory, as well as the effect of digital customer sentiment as an important facilitator of stock market movements at the Pakistan Stock Exchange (PSX). Primary data were collected using a structured questionnaire from 270 active market participants. It was done with a deductive approach and a positivist philosophy. Data analysis was performed using PLS-SEM. The results of the tests showed that the relationship between digitally expressed sentiment and stock price changes, as well as the volatility of the stock market, is positive and highly significant, indicating that digitally expressed sentiment is a strong predictor of stock price changes and stock market volatility. The findings support the entire efficient market hypothesis and emphasize the influence of behavioral and sentiment processes in investment decision-making. The article has added to the body of literature on behavioral finance by offering empirical data from a developing market and by exploring the practical implications of using digital sentiment analytics in investment practices, market surveillance, and policy-making.

Keywords: Digital customer sentiment, Stock market movements, Behavioral finance, Pakistan Stock Exchange.