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What Does Investors' Online Divergence of Opinion Tell Us about Stock Returns and Trading Volume?

Journal of Business Research, Forthcoming

37 Pages Posted: 9 Jan 2018

See all articles by Alya Al-Nasseri

Alya Al-Nasseri

Salalah College of Technology

Faek Menla Ali

University of Sussex -University of Sussex Business School

Date Written: January 5, 2018

Abstract

We analyse 289,443 online tweets from StockTwits and construct a divergence of opinion (disagreement) indicator for investigating the impact of disagreement on stock returns and trading volume. We find that the impact of disagreement on returns is asymmetric; it is negative (positive) during bull (bear) market periods. We also find that higher online disagreement increases trading volume; this effect is detected irrespective of whether the market is bullish or bearish. Moreover, portfolio strategies that are designed on the basis of our disagreement indicator are shown to generate abnormal profits. Overall, our results confirm the important role of belief dispersion in financial markets.

Keywords: Disagreement, Online tweets, Stock returns, Trading volume

JEL Classification: C21, G02, G14

Suggested Citation

Al-Nasseri, Alya and Menla Ali, Faek, What Does Investors' Online Divergence of Opinion Tell Us about Stock Returns and Trading Volume? (January 5, 2018). Journal of Business Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3097007

Alya Al-Nasseri

Salalah College of Technology ( email )

Salalah
Oman

Faek Menla Ali (Contact Author)

University of Sussex -University of Sussex Business School ( email )

Falmer
Brighton, East Sussex BN1 9SL
United Kingdom

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