The Democratization of Investment Research and the Informativeness of Retail Investor Trading
62 Pages Posted: 22 Aug 2018 Last revised: 18 Oct 2019
Date Written: October 15, 2019
We explore whether crowdsourced investment research published on Seeking Alpha (SA) facilitates the process by which retail investors become informed. We find a sharp increase in retail trading within 30 minutes of publication that is directionally consistent with article sentiment. Moreover, the relation between retail order flow and future returns is three times as large on days when SA research articles are published. The incremental informativeness is stronger for articles that generate many comments or are authored by skilled contributors. Retail order flow on days with SA research also predicts future media article tone, consistent with retail trading being information-driven.
Keywords: Investment Research, Seeking Alpha, Retail Investors, Informed Trading
JEL Classification: G14
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