Bulls and Bears: Disagreement and Trading Volume Around News Announcements
46 Pages Posted: 23 May 2018
Date Written: May 3, 2018
We examine the association between disagreement and trading volume around news events using a novel measure of disagreement that overcomes two challenges Bamber et al. (2011) identify as facing earlier measures. Specifically, we measure disagreement based on heterogenous opinions about firm value of StockTwits users. We find strong results that both pre-existing disagreement and the change in disagreement following the earnings announcement are both associated with trading volume. We next provide novel evidence on the differential effects of attention and disagreement by examining the impact of more influential users in the StockTwits network. We find that disagreement between influential investors is associated with incrementally higher trading volume. Our measure of disagreement generalizes to other news events, consistent with the measure capturing disagreement about firm value, not just the short-term earnings prospects of the firm. Our results provide evidence consistent with the importance of both pre-existing heterogeneity between users of financial statement information and preliminary evidence that disagreement between individuals about financial information can be affected by online social networks.
Keywords: Social Media, Disagreement, Volume, Earnings Announcements
JEL Classification: M40
Suggested Citation: Suggested Citation