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Listening in on investors’ thoughts and conversations

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  • Chen, Hailiang
  • Hwang, Byoung-Hyoun

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.

Suggested Citation

  • Chen, Hailiang & Hwang, Byoung-Hyoun, 2022. "Listening in on investors’ thoughts and conversations," Journal of Financial Economics, Elsevier, vol. 145(2), pages 426-444.
    • Handle: RePEc:eee:jfinec:v:145:y:2022:i:2:p:426-444
    DOI: 10.1016/j.jfineco.2021.09.004
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    More about this item

    Keywords

    Social interactions; Social transmission bias; Asset prices;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G40 - Financial Economics - - Behavioral Finance - - - General

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