The Rate of Communication

Abstract

We study the transmission of financial news and opinions through social interactions. We identify a series of plausibly exogenous shocks, which cause “treated investors” to trade abnormally. We then trace the “contagion” of abnormal trading activity from the treated investors to their neighbors and their neighbors’ neighbors. Coupled with methodology drawn from epidemiology, our setting allows us to estimate the rate of communication and how much such rate varies with characteristics of the underlying investor population.

Keywords: Social Interaction, Investor Communication, Information Diffusion

JEL Classification: G11, G12, G14, G20