The Convergence and Divergence of Investors’ Opinions around Earnings News: Evidence from a Social Network
64 Pages Posted: 8 Mar 2012 Last revised: 30 Nov 2018
Date Written: August 13, 2018
We collect a unique dataset of Twitter posts to examine the change in investor disagreement around earnings announcements. We find that investors’ opinions can either converge (reduced disagreement) or diverge (increased disagreement) around earnings announcements. The convergence and divergence of opinion has significant effects on trading volume and return. Consistent with theoretical predictions, both the convergence of opinion and the divergence of opinion are associated with greater volume reaction to earnings news. While the convergence of opinion is associated with lower earnings announcement returns, the divergence of opinion is associated with higher earnings announcement returns.
Keywords: investor disagreement, earnings announcements, Twitter, trading volume, convergence of opinion, divergence of opinion
JEL Classification: G14, C81
Suggested Citation: Suggested Citation