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Social transmission bias: evidence from an online investor platform

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  • Pengfei Sui
  • Baolian Wang

Abstract

Using data from a Twitter-like investor social platform, we document evidence consistent with self-enhancing transmission bias. We find investors are more likely to post about their better-performing stocks. Their followers are more likely to buy the posted stocks than other non-posted stocks. The effect of the postings on follow-up purchases is consistent with an attention-based interpretation: the postings bring the discussed stocks into the followers’ choice set and increase their purchases. We also find that postings’ effect on follow-up purchases is related to postings’ perceived credibility. The performance-postings relationship is stronger among more volatile stocks and the relationship between postings and follow-up purchases is stronger among stocks with higher recent returns, shedding light on the spread of high-variance and extrapolative strategies. We also document that the social network features influential nodes.

Suggested Citation

  • Pengfei Sui & Baolian Wang, 2025. "Social transmission bias: evidence from an online investor platform," Review of Finance, European Finance Association, vol. 29(6), pages 1663-1697.
    • Handle: RePEc:oup:revfin:v:29:y:2025:i:6:p:1663-1697.
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    File URL: http://hdl.handle.net/10.1093/rof/rfaf048
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    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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