Biased Information Transmission in Investor Social Networks: Evidence From Professional Traders

66 Pages Posted: 14 Dec 2021 Last revised: 7 Nov 2022

See all articles by Jacqueline N. Lane

Jacqueline N. Lane

Harvard Business School - Technology and Operations Management Unit

Sonya S. Lim

DePaul University - Department of Finance

Brian Uzzi

Northwestern University - Kellogg School of Management

Date Written: October 30, 2022

Abstract

Using instant message communications and trading records of professional traders, we directly measure how investment information propagates in traders’ social networks and how it affects their trading decisions and performance. Traders are more likely to mention stocks with gains over losses, especially with their strong ties with whom they communicate more frequently. The asymmetry is stronger when the sender’s past returns are low and for closed positions. However, recipients are more likely to incorporate information about losses into their subsequent trading decisions. Receiving a message about a stock, especially from a weak tie, is associated with higher abnormal returns.

Keywords: social transmission bias, investor social network

JEL Classification: G02, G11, G14

Suggested Citation

N. Lane, Jacqueline and Lim, Sonya S. and Uzzi, Brian, Biased Information Transmission in Investor Social Networks: Evidence From Professional Traders (October 30, 2022). Available at SSRN: https://ssrn.com/abstract=3956040 or http://dx.doi.org/10.2139/ssrn.3956040

Jacqueline N. Lane

Harvard Business School - Technology and Operations Management Unit ( email )

Boston, MA 02163
United States

Sonya S. Lim (Contact Author)

DePaul University - Department of Finance ( email )

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States

HOME PAGE: http://sites.google.com/site/sonyalim/

Brian Uzzi

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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