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Stock mispricing, hard-to-value stocks and the influence of internet stock message boards

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  • Xiong, Xiong
  • Meng, Yongqiang
  • Joseph, Nathan Lael
  • Shen, Dehua

Abstract

In recent years, the predictability of Internet Stock Message Board (ISMB) postings has been intensively investigated. However, the underlying mechanisms driving the ISMB postings and their influence on hard-to-value stocks remain largely unexplored. In this paper, we show that the information contained in the process underlying ISMB postings contains characteristics that are associated with investor sentiment. In particular, we show that short-term ISMB postings contain persistence in hard-to-value stocks and stocks with high ISMB postings underperform in the long-term. Our empirical findings indicate that ISMB postings proxy reasonably well for firm-specific investor sentiment and are associated with temporary mispricing in stocks.

Suggested Citation

  • Xiong, Xiong & Meng, Yongqiang & Joseph, Nathan Lael & Shen, Dehua, 2020. "Stock mispricing, hard-to-value stocks and the influence of internet stock message boards," International Review of Financial Analysis, Elsevier, vol. 72(C).
  • Handle: RePEc:eee:finana:v:72:y:2020:i:c:s1057521920302209
    DOI: 10.1016/j.irfa.2020.101576
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    More about this item

    Keywords

    Internet stock message board; Firm-specific investor sentiment; Sentiment-driven mispricing; Behavioral biases;
    All these keywords.

    JEL classification:

    • 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

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