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Agreeing to Disagree: Informativeness of Sentiments in Internet Message Boards

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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.
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  • Ton, Thai & Leung, Henry & Gao, Yang & Schiereck, Dirk, 2024. "Agreeing to Disagree: Informativeness of Sentiments in Internet Message Boards," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 150251, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:150251
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/150251/
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    JEL classification:

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

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