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Investor interaction and price efficiency: Evidence from social media

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  • Cao, Xing
  • Zhang, Yongjie
  • Feng, Xu
  • Meng, Xiangtong

Abstract

Previous studies have paid scant attention to the different interaction modes of investors. This paper employs a network model to describe different types of investor interaction behaviors in financial social media and study the impact of such interaction behavior on the price efficiency of stocks. We find that single social media interaction is positively related to price efficiency, while null interaction is negatively related to price efficiency. However, binary interaction is an excessive interaction mode. It reduces the promotion effect of interaction on price efficiency. Furthermore, we provide an explanation of the interaction effect through private information and investor recognition.

Suggested Citation

  • Cao, Xing & Zhang, Yongjie & Feng, Xu & Meng, Xiangtong, 2021. "Investor interaction and price efficiency: Evidence from social media," Finance Research Letters, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320304839
    DOI: 10.1016/j.frl.2020.101747
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    2. Wu, Chunying & Xiong, Xiong & Gao, Ya & Zhang, Jin, 2022. "Does social media distort price discovery? Evidence from rumor clarifications," Research in International Business and Finance, Elsevier, vol. 62(C).
    3. Chunying Wu & Xiong Xiong & Ya Gao, 2022. "Does ESG Certification Improve Price Efficiency in the Chinese Stock Market?," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(1), pages 97-122, March.

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