Listening In On Investors' Thoughts And Conversations

Nanyang Business School Research Paper No. 21-39

Forthcoming, Journal of Financial Economics

47 Pages Posted: 1 Nov 2021 Last revised: 22 Nov 2021

See all articles by Hailiang Chen

Hailiang Chen

HKU Business School, The University of Hong Kong

Byoung-Hyoun Hwang

Nanyang Business School, Nanyang Technological University

Date Written: August 9, 2021

Abstract

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

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

Hailiang Chen

HKU Business School, The University of Hong Kong ( email )

K. K. Leung Building
University of Hong Kong
Hong Kong

HOME PAGE: http://www.fbe.hku.hk/people/academic/hailiang-chen

Byoung-Hyoun Hwang (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore

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