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Cheap Talk on the Web: The Determinants of Postings on Stock Message Boards

Peter D. Wysocki
Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA)

November 1998

University of Michigan Business School Working Paper No. 98025

Abstract:
This paper examines the cross-sectional and time-series determinants of message-posting volume on stock message boards on the Web. I test whether variation in message-posting volume is just noise or is related to underlying firm characteristics and stock market activity. Using a sample of over 3,000 stocks listed on Yahoo! message boards, I find that cumulative posting volume is, on average, highest for firms with extreme past returns and accounting performance, high market capitalization, high price-earnings and market-to-book ratios, high volatility and trading volume, high analyst following and low institutional holdings. Changes in daily posting volume are associated with earnings-announcement events and daily changes in stock trading volume and returns. Overnight message-posting volume is found to predict changes in next day stock trading volume and returns. Rational and behavioral explanations for the observed pattern in message-posting activity are discussed.

JEL Classifications: G12, G14

Working Paper Series

Date posted: April 20, 1999 ; Last revised: April 20, 1999

Suggested Citation

Wysocki, Peter D., Cheap Talk on the Web: The Determinants of Postings on Stock Message Boards (November 1998). University of Michigan Business School Working Paper No. 98025. Available at SSRN: http://ssrn.com/abstract=160170 or doi:10.2139/ssrn.160170

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Contact Information

Peter D. Wysocki (Contact Author)

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States
617-253-6623 (Phone)

HOME PAGE: http://mit.edu/wysockip/