Who Influences Whom? Behavior Contagion Among Investors
86 Pages Posted:
Date Written: November 6, 2020
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: Suggested Citation