Is Talk Cheap Online: Strategic Interaction in A Stock Trading Chat Room
We consider a model of an internet chat room with free entry but secure identity. Traders exchange messages in real time of both a fundamental and non-fundamental nature. We explore conditions under which traders post truthful information and make trading decisions. We also a describe an equilibrium in which momentum traders profit from their exposure to informed traders in the chat room. The model generates a number of empirical predictions: (1) unskillful traders post more often than skillful traders; (2) skillful traders will not follow unskillful traders in stock picking; (3) The optimal strategy for unskillful traders is to follow skillful traders in stock picking. We test and affirm all three predictions using a unique data set of chat room logs from the Activetrader Financial Chat Room.
|Date of creation:||08 Jan 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (732) 932-7482
Fax: (732) 932-7416
Web page: http://snde.rutgers.edu/Rutgers/wp/rutgers-wplist.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
- Bruce Mizrach, 2003. "Analyst Recommendations and Nasdaq Market Making Activity," Departmental Working Papers 200307, Rutgers University, Department of Economics.
- Gina Nicolosi & Liang Peng & Ning Zhu, 2003.
"Do Individual Investors Learn from Their Trading Experience?,"
Yale School of Management Working Papers
ysm439, Yale School of Management, revised 01 Sep 2009.
- Nicolosi, Gina & Peng, Liang & Zhu, Ning, 2009. "Do individual investors learn from their trading experience?," Journal of Financial Markets, Elsevier, vol. 12(2), pages 317-336, May.
- Gina Nicolosi & Liang Peng, 2004. "Do individual investors learn from their trading experience," Econometric Society 2004 North American Summer Meetings 532, Econometric Society.
- Werner Antweiler & Murray Z. Frank, 2004. "Is All That Talk Just Noise? The Information Content of Internet Stock Message Boards," Journal of Finance, American Finance Association, vol. 59(3), pages 1259-1294, 06.
When requesting a correction, please mention this item's handle: RePEc:rut:rutres:200701. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.