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

See all articles by Robert Charles Giannini

Robert Charles Giannini

Citadel

Paul J. Irvine

Neeley School of Business

Tao Shu

The Chinese University of Hong Kong, Shenzhen; Shenzhen Finance Institute

Date Written: August 13, 2018

Abstract

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

Giannini, Robert Charles and Irvine, Paul J. and Shu, Tao, The Convergence and Divergence of Investors’ Opinions around Earnings News: Evidence from a Social Network (August 13, 2018). Asian Finance Association (AsFA) 2013 Conference, Finance Down Under 2014 Building on the Best from the Cellars of Finance, Available at SSRN: https://ssrn.com/abstract=2017748 or http://dx.doi.org/10.2139/ssrn.2017748

Robert Charles Giannini

Citadel ( email )

NY
United States

Paul J. Irvine (Contact Author)

Neeley School of Business ( email )

Fort Worth, TX 76129
United States

Tao Shu

The Chinese University of Hong Kong, Shenzhen ( email )

Shenzhen Finance Institute ( email )

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