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Echo Chambers

Author

Listed:
  • J Anthony Cookson
  • Joseph E Engelberg
  • William Mullins
  • Itay Goldstein

Abstract

We find evidence of selective exposure to confirmatory information among 400,000 users on the investor social network StockTwits. Self-described bulls are five times more likely to follow a user with a bullish view of the same stock than are self-described bears. Consequently, bulls see 62 more bullish messages and 24 fewer bearish messages than bears do over the same 50-day period. These “echo chambers” exist even among professional investors and are strongest for investors who trade on their beliefs. Finally, beliefs formed in echo chambers are associated with lower ex post returns, more siloing of information, and more trading volume.

Suggested Citation

  • J Anthony Cookson & Joseph E Engelberg & William Mullins & Itay Goldstein, 2023. "Echo Chambers," The Review of Financial Studies, Society for Financial Studies, vol. 36(2), pages 450-500.
    • Handle: RePEc:oup:rfinst:v:36:y:2023:i:2:p:450-500.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhac058
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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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