Why Don't We Agree? Evidence from a Social Network of Investors
70 Pages Posted: 26 Mar 2016 Last revised: 28 Sep 2016
Date Written: September 27, 2016
We study the sources of investor disagreement using sentiment expressed by investors on a social media investing platform, combined with information on the users’ investment approaches (e.g., technical, fundamental). We examine how much of overall disagreement is driven by different information sets versus differential interpretation of the same information, by studying disagreement within and across investment approaches. We find that differences of opinion across investment approaches account for 47.7% of the overall disagreement at the firm-day level. Moreover, changes in our measures of disagreement robustly forecast abnormal trading volume, suggesting that our measures proxy well for disagreement in the wider market. Our findings suggest that improvements to informational efficiency of financial markets by regulators will not completely erode high trading volume and stock market volatility.
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