Listening In On Investors' Thoughts And Conversations

A large literature in neuroscience and social psychology shows that humans are wired to be meticulous about how they are perceived by others. In this paper, we propose that impression management considerations can also end up guiding the content that investors transmit via word of mouth and inadvertently lead to the propagation of noise. We analyze server log data from one of the largest investment-related websites in the United States. Consistent with our proposition, we find that investors more frequently share articles that are more suitable for impression management despite such articles less accurately predicting returns. Additional analyses suggest that high levels of sharing can lead to overpricing.

Keywords: Social interactions, Social transmission bias, Asset prices

JEL Classification: G11, G12, G14, G40

Suggested Citation: Suggested Citation

Chen, Hailiang and Hwang, Byoung-Hyoun, Listening In On Investors' Thoughts And Conversations (August 9, 2021). Nanyang Business School Research Paper No. 21-39, Forthcoming, Journal of Financial Economics, Available at SSRN: https://ssrn.com/abstract=3951666 or http://dx.doi.org/10.2139/ssrn.3951666