Social Media Livestreaming: Investor Information or Persuasion?

Abstract

Mutual funds in China recently began using social media livestreams to deliver video presentations and engage with viewers, ostensibly for the purpose of retail investor education. Analyzing over 20,000 livestreams since 2020, we find that livestreams drive highly significant fund inflows. Intraday tests find that inflows precisely coincide with livestreams’ start times, consistent with a causal effect. However, inconsistent with the goal of improving investor education, we find that livestreams exacerbate retail investors’ tendencies to chase returns and predict sharp declines in fund performance. Investors who buy in response to livestreams would earn higher returns by holding low-cost index funds or even cash. Our findings indicate that livestreams function as persuasive advertising and suggest that investors should be wary of educational efforts by sellers of consumer financial products. Additionally, we conclude that prior findings about the benefits of firms’ social media use in equity markets do not necessarily extend to financial product markets.

JEL Classification: D14, G11, G23, G14, G41, G53, M31, M41