Investor Reliance on the Crowd

46 Pages Posted: 4 Apr 2017

See all articles by Alastair Lawrence

Alastair Lawrence

London Business School

James Ryans

London Business School

Estelle Sun

Boston University - Questrom School of Business

Akshay Soni

Yahoo! - Yahoo! Research Labs

Date Written: March 28, 2017

Abstract

Using Yahoo Finance search data, we document that when investors search for investment information they by far and large rely on the information of crowds. The results indicate that this reliance significantly varies across industries, and is most pronounced in firms with greater uncertainty and weaker information environments. Moreover, significant increases in the reliance on message boards consistently predict future negative stock returns and increases in information asymmetry, suggesting that investors’ increasing reliance on crowds provides insights into their expectations of firm performance and future sell-offs.

Keywords: Investor reliance, crowd information, negative returns, uncertainty, information environment

JEL Classification: M41, G11, G14

Suggested Citation

Lawrence, Alastair and Ryans, James and Sun, Estelle Yuan and Soni, Akshay, Investor Reliance on the Crowd (March 28, 2017). Available at SSRN: https://ssrn.com/abstract=2945411 or http://dx.doi.org/10.2139/ssrn.2945411

Alastair Lawrence (Contact Author)

London Business School ( email )

Regent's Park
London
United Kingdom

HOME PAGE: http://Www.alastairlawrence.net

James Ryans

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom

HOME PAGE: http://www.london.edu

Estelle Yuan Sun

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States
1-617-353-2353 (Phone)

Akshay Soni

Yahoo! - Yahoo! Research Labs ( email )

Sunnyvale, CA 94089
United States

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