Social Media, Financial Reporting Opacity, and Return Co-movement: Evidence From Seeking Alpha

58 Pages Posted: 20 Mar 2020

See all articles by Rong Ding

Rong Ding

University of Warwick - Warwick Business School

Hang ZHOU

University of Edinburgh

Yifan Li

University of Manchester - Alliance Manchester Business School; Lancaster University - Department of Accounting and Finance

Date Written: October 18, 2019

Abstract

In this study, we develop a model to analyze the interplay between the coverage of a firm on social media, financial reporting opacity, and stock return co-movement. Our model predicts a negative association between social media coverage and co-movement as social media facilitates the incorporation of firm-specific information into stock price. It also predicts that the effect of social media coverage on co-movement is more pronounced among firms with higher financial reporting opacity. Using data from Seeking Alpha, the largest crowd-sourced social media platform that provides “third-party generated” financial analysis in US, we find results consistent with the model’s predictions.

Keywords: Social Media, Co-Movement, Seeking Alpha, Financial Reporting Opacity

JEL Classification: G11, G12, G14

Suggested Citation

Ding, Rong and Zhou, Hang and Li, Yifan, Social Media, Financial Reporting Opacity, and Return Co-movement: Evidence From Seeking Alpha (October 18, 2019). Journal of Financial Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3544354

Rong Ding

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Hang Zhou (Contact Author)

University of Edinburgh ( email )

29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
United Kingdom
+44(0)131 6511030 (Phone)

Yifan Li

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Lancaster LA1 4YX
United Kingdom

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