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Social media, financial reporting opacity, and return comovement: Evidence from Seeking Alpha

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  • Ding, Rong
  • Zhou, Hang
  • Li, Yifan

Abstract

In this study, we develop a model to analyze the interplay between the coverage of a firm on social media, financial reporting opacity, and stock return comovement. Our model predicts a negative association between social media coverage and comovement as social media facilitates the incorporation of firm-specific information into stock price. It also predicts that the effect of social media coverage on comovement is more pronounced among firms with higher financial reporting opacity. Using data from Seeking Alpha, the largest crowdsourced social media platform that provides “third-party generated” financial analysis in US, we find results consistent with the model's predictions.

Suggested Citation

  • Ding, Rong & Zhou, Hang & Li, Yifan, 2020. "Social media, financial reporting opacity, and return comovement: Evidence from Seeking Alpha," Journal of Financial Markets, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finmar:v:50:y:2020:i:c:s1386418119300126
    DOI: 10.1016/j.finmar.2019.100511
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    Cited by:

    1. Lu, Shan & Zhao, Jichang, 2024. "Investor network and stock return comovement: Information-seeking through intragroup and intergroup followings," International Review of Financial Analysis, Elsevier, vol. 93(C).
    2. Jie Li & Li Yu & Xiaofeng Mei & Xu Feng, 2022. "Do social media constrain or promote company violations?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 31-70, March.
    3. Shuhong Wang & Xiaojing Yi & Malin Song, 2023. "The interrelationship of air quality, investor sentiment, and stock market liquidity: a review of China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(10), pages 10955-10973, October.
    4. Chen, Zhongdong & Craig, Karen Ann, 2023. "Active attention, retail investor base, and stock returns," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).
    5. Chen, Zhang-HangJian & Wu, Wang-Long & Li, Sai-Ping & Bao, Kun & Koedijk, Kees G., 2024. "Social media information diffusion and excess stock returns co-movement," International Review of Financial Analysis, Elsevier, vol. 91(C).
    6. Gaganis, Chrysovalantis & Leledakis, George & Pasiouras, Fotios & Pyrgiotakis, Emmanouil, 2021. "National culture of secrecy and stock price synchronicity: Cross-country evidence," MPRA Paper 105432, University Library of Munich, Germany.

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    More about this item

    Keywords

    Social media; Comovement; Seeking Alpha; Financial reporting opacity;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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