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Information Valuation and Confirmation Bias in Virtual Communities: Evidence from Stock Message Boards


  • JaeHong Park

    () (School of Management, Kyung Hee University, Dongdaemun-gu, Seoul, South Korea 130-701)

  • Prabhudev Konana

    () (McCombs School of Business, University of Texas at Austin, Austin, Texas 78712)

  • Bin Gu

    () (The W.P. Carey School of Business, Arizona State University, Tempe, Arizona 85281)

  • Alok Kumar

    () (School of Business Administration, University of Miami, Coral Gables, Florida 33146)

  • Rajagopal Raghunathan

    () (McCombs School of Business, University of Texas at Austin, Austin, Texas 78712)


Virtual communities continue to play a greater role in social, political, and economic interactions. However, how users value information from these communities and how that affects their behavior and future expectations is not fully understood. Stock message boards provide an excellent setting to analyze these issues given the large user base and market uncertainty. Using data from 502 investor responses from a field experiment on one of the largest message board operators in South Korea, our analyses revealed that investors exhibit confirmation bias, whereby they preferentially treat messages that support their prior beliefs. This behavior is more pronounced for investors with higher perceived knowledge about the market and higher strength of belief (i.e., sentiment) toward a particular stock. We also find a negative interaction effect between the perceived knowledge and the strength of prior belief on confirmation bias. Those exhibiting confirmation bias are also more overconfident; as a result, they trade more actively and expect higher market returns than is warranted. Collectively, these results suggest that participation in virtual communities may not necessarily lead to superior financial returns.

Suggested Citation

  • JaeHong Park & Prabhudev Konana & Bin Gu & Alok Kumar & Rajagopal Raghunathan, 2013. "Information Valuation and Confirmation Bias in Virtual Communities: Evidence from Stock Message Boards," Information Systems Research, INFORMS, vol. 24(4), pages 1050-1067, December.
  • Handle: RePEc:inm:orisre:v:24:y:2013:i:4:p:1050-1067

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    References listed on IDEAS

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    3. Dezhi Yin & Sabyasachi Mitra & Han Zhang, 2016. "Research Note—When Do Consumers Value Positive vs. Negative Reviews? An Empirical Investigation of Confirmation Bias in Online Word of Mouth," Information Systems Research, INFORMS, vol. 27(1), pages 131-144, March.
    4. Ting Li & Robert J. Kauffman & Eric van Heck & Peter Vervest & Benedict G. C. Dellaert, 2014. "Consumer Informedness and Firm Information Strategy," Information Systems Research, INFORMS, vol. 25(2), pages 345-363, June.
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    6. Sinha, Ankur & Kedas, Satishwar & Kumar, Rishu & Malo, Pekka, 2019. "Buy, Sell or Hold: Entity-Aware Classification of Business News," IIMA Working Papers WP 2019-04-02, Indian Institute of Management Ahmedabad, Research and Publication Department.


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