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Can Local Posts Predict Firm-Level Earnings and Stock Returns?

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  • Xuejun Jin
  • Zhenzi Tian
  • Xin Hong

Abstract

This paper examines the predictive power of local versus non-local investors’ opinions on Chinese stock message boards. We find that local investors can predict earnings surprises and stock returns, particularly in firms with weak information environments, while non-local investors cannot. The advantage of local investors is stronger in densely populated provinces, firms with more employees, or those in manufacturing. These findings suggest that local investors gain information through interactions with employees and observations of firms, with word-of-mouth as a key channel for further disseminating this information. Additionally, local investors with higher pre-announcement local fan proportions demonstrate stronger predictive power, reflecting their ability to discern local information, a skill non-locals lack. This explains why local information remains valuable even when shared online.

Suggested Citation

  • Xuejun Jin & Zhenzi Tian & Xin Hong, 2025. "Can Local Posts Predict Firm-Level Earnings and Stock Returns?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 61(12), pages 3658-3673, September.
    • Handle: RePEc:mes:emfitr:v:61:y:2025:i:12:p:3658-3673
    DOI: 10.1080/1540496X.2025.2487573
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