Nexus Between Twitter-based Sentiment and Tourism Sector Performance Amid COVID-19 Pandemic
The tourism sector is one of the most affected sectors due to the catastrophic events that unfolded during this pandemic. COVID-19 caused irreversible damage to the businesses and services of this sector in comparison to others (Everingham and Chassagne, 2020). Due to the detrimental effect of COVID-19 on tourism firms, they are confronted with liquidity shortage, and operational risk as industry functioning depends on human movement and interactions, which got curtailed by the perceived fear of exposure to getting infected by the virus (Song et al., 2021). This phenomenon, coupled with a spike in uncertainty during the period, induced investors to sell off the stocks of tourism firms, which negatively impacted tourism stock returns (Ding et al., 2021).
Along with the increasing concern over the pandemic, there has been a surge in information searches relating to COVID-19 over the internet among investors (Smales, 2021). During crises, people rely on platforms like Twitter, which is the most felicitous way to easily convey and consume information (Zahra et al., 2020). Tweets from the users are also recognized to provide substantial information on the collective behavior of market participants (Nofer and Hinz, 2015). This information can positively and negatively influence the tourism sector (Lee et al., 2020). Therefore, the COVID-19 pandemic provided a unique setting to document how Twitter-based investor attention plays a role in the tourism sector.
The pandemic’s unprecedented nature increased uncertainty worldwide due to its economic consequences (McKibbin and Fernando, 2021). This leads authors to examine the role of Twitter-based Economic Uncertainty (TEU) on the tourism sector equity movements. The study uses the number of tweets regarding COVID-19 as the measure of investor attention and tries to gauge the influence of COVID-19 Tweets on travel and leisure (hereafter T&L) stocks.
The findings indicate that TEU impacts the tourism stock returns heterogeneously across the regions. The results imply that the scale of economic uncertainty connected with the COVID-19 pandemic has a significant negative impact on the tourism sector, nearly bringing it to a halt due to global lockdowns and travel restrictions. The COVID-19 crisis caused revenue shocks in most sectors, notably the tourism sector. As a result, investors anticipated tourism firms to perform poorly in the future, resulting in a decline in stock prices and subsequently reduced stock returns (Liu et al., 2020).
Next, the authors also investigate the impact of the number of tweets and TEU on the volatility of tourism stocks. They observe statistically significant and positive estimates of tweets for all Τ&L indices, indicating that the number of tweets increases the volatility of tourism stocks consistently across all the regions. The notion that higher attention will increase the information flow into the market, which leads to a surge in volatility, is related to the Mixture of Distribution Hypothesis (Darolles et al., 2017). In this specification, the volume of tweets regarding COVID-19 may be considered an information flow measure. These findings align with the prior literature exhibiting that market volatility increases with financial and economic uncertainty (Bai et al., 2020).
Note: This article is based on the research article “Nexus between Twitter-based sentiment and tourism sector performance amid COVID-19 pandemic” written by Shiljas, Dilip Kumar, and Hajam Abid Bashir. Click here to connect with the author on LinkedIn.
