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Crowd wisdom and internet searches: What happens when investors search for stocks?

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  • Geng, Yuedan
  • Ye, Qiang
  • Jin, Yu
  • Shi, Wen

Abstract

Search engines and social media have become popular among investors as tools for finding and sharing information. The investor social media gathers a large amount of investor-generated content (IGC), which reflects the crowd wisdom of investors, while search engines help investors increase their chances of finding them. In this study, we integrate investor search behavior data from the Baidu Index and investor crowd wisdom data from Eastmoney Guba to assemble a unique data set at the daily level. We then describe and quantify crowd wisdom from investor-generated content (IGC) using three dimensions (IGC average sentiment, IGC sentiment volatility, and IGC increased volume) to investigate the impact of crowd wisdom in the relationship between investors' Internet searches and next-day stock returns. In our empirical analysis, we find that IGC average sentiment strengthens the relationship between investors' Internet searches and next-day stock returns, while IGC sentiment volatility and IGC increased volume have negative effects. These moderating effects are also moderated by institutional investor attention, search terminal preference, and content reading volume. These findings help to explain the value and impact of crowd wisdom when investors search for stock information through the Internet.

Suggested Citation

  • Geng, Yuedan & Ye, Qiang & Jin, Yu & Shi, Wen, 2022. "Crowd wisdom and internet searches: What happens when investors search for stocks?," International Review of Financial Analysis, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finana:v:82:y:2022:i:c:s1057521922001697
    DOI: 10.1016/j.irfa.2022.102208
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    More about this item

    Keywords

    Internet search; Crowd wisdom; Investor-generated content (IGC); Social media; Stock returns;
    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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