Social Media Disclosure and Stock Price Synchronicity

Abstract

According to the efficient market hypothesis, stock price is determined by market information. Since 2010, a new social media disclosure, called “Hudongyi” has been launched by Shenzhen Stock Exchange. The social media provides an inter-communication feature for information disclosure compared with traditional firm announcements. So, can the social media disclosure provide additional firm-specific information to the market? To investigate the research question, we design surprise index and specificity index based on the Q&A texts on “Hudongyi”, and empirically analyze the relationships between the two indexes and the stock price synchronicity. The results showed that there are significant negative effects of the two indexes on synchronization of stock price. That is, the more information the messages published by companies on the platform contain, or the higher the proportion of information related to the company itself contain, the lower the synchronization. The findings provide important theoretical and practical implications.

Keywords: Stock Price Synchronicity, Information Disclosure, Surprise Index, Specificity

JEL Classification: G14