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Does Monetary Incentive Lead to Better Stock Recommendations on Social Media?

24 Pages Posted: 9 May 2017  

Hailiang Chen

City University of Hong Kong - Department of Information Systems

Yu Jeffrey Hu

Georgia Institute of Technology - Scheller College of Business

Shan Huang

Massachusetts Institute of Technology (MIT)

Date Written: May 1, 2017

Abstract

Social media not only is a new channel to obtain financial market information but also becomes the venue for investors to share and exchange investment ideas. We examine the performance consequences of providing monetary incentive to amateur analysts on social media and its implications for crowd-sourced equity research. We find that monetary incentive is effective in increasing the amount of content outputs but does not lead to better stock recommendations. Additional analysis suggests that monetary incentive results in wider stock and industry coverage, a sign of increased content diversity. This study contributes to the understanding of incentive mechanisms for social media communities in the financial context.

Keywords: Monetary Incentive, Blog, Wisdom of Crowds, Stock Market, Investment

Suggested Citation

Chen, Hailiang and Hu, Yu Jeffrey and Huang, Shan, Does Monetary Incentive Lead to Better Stock Recommendations on Social Media? (May 1, 2017). Georgia Tech Scheller College of Business Research Paper No. 17-23. Available at SSRN: https://ssrn.com/abstract=2964503 or http://dx.doi.org/10.2139/ssrn.2964503

Hailiang Chen (Contact Author)

City University of Hong Kong - Department of Information Systems ( email )

Kowloon Tong
Hong Kong

HOME PAGE: http://www.cb.cityu.edu.hk/staff/hailchen/

Yu Jeffrey Hu

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Shan Huang

Massachusetts Institute of Technology (MIT) ( email )

100 Main St
461
Cambridge, MA 02142
United States

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