Who Influences Whom? Behavior Contagion Among Investors

86 Pages Posted:

Date Written: November 6, 2020

Abstract

Social interaction and information transmission are essential components in pricing and trading in financial markets. To investigate the behavior contagion, herding/dispersing and information cascades, among investors, we deploy the jump-diffusion Hawkes processes on investors’ sentiments which extracted from StockTwits, a social media investing platform. By taking advantage of the generalized method of moments (GMM), we find strong statistical evidence that supports the living of self-excitation within groups, e.g., fundamental investors, and cross- excitation between several pairs of groups within each category, e.g., investment approach. The GMM methodology simultaneously with self-excitation and cross- excitation allows us to identify the dispersing within groups and imitate herding or information cascades across various groups within a category, respectively.

Keywords: Sentiment; Jumps; Hawkes Processes; Behaviour Contagion; Herding/dispersing; Information Cascades

JEL Classification: C58; G4; C32

Suggested Citation

Fallahgoul, Hasan A and Lin, Xin, Who Influences Whom? Behavior Contagion Among Investors (November 6, 2020). Available at SSRN: https://ssrn.com/abstract=

Hasan A Fallahgoul (Contact Author)

Monash University ( email )

Clayton Campus
Victoria, 3800
Australia

HOME PAGE: http://www.hfallahgoul.com

Xin Lin

Monash University ( email )

Clayton Campus
Victoria, 3800
Australia

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