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Agreeing to disagree: Informativeness of sentiments in internet message boards

Author

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  • Ton, Thai
  • Leung, Henry
  • Gao, Yang
  • Schiereck, Dirk

Abstract

We study the informativeness of the sentiment of posts on Australia's largest online stock message board, HotCopper. We explore whether disagreements among sentiment form a signal about the fundamental news of a company. We find that positive sentiment is associated with noise induced (uniformed) trading whereas negative sentiment contains value-relevant information about a firm's performance. Our empirical findings suggest that short selling activity reduces overreactions of abnormal returns in a noisy environment on the same day. Furthermore, we observe a sentiment convergence pattern around annual earnings announcements and low levels of sentiment homogeneity relate to significantly lower annual earnings surprise. This supports the view that disagreements among sentiments are a signal of bad news about firm fundamentals.

Suggested Citation

  • Ton, Thai & Leung, Henry & Gao, Yang & Schiereck, Dirk, 2024. "Agreeing to disagree: Informativeness of sentiments in internet message boards," Pacific-Basin Finance Journal, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:pacfin:v:87:y:2024:i:c:s0927538x24002373
    DOI: 10.1016/j.pacfin.2024.102485
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    Keywords

    Financial innovation; Internet message boards; Sentiments; Agreements; Volatility;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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