Messages in online stock forums and stock price synchronicity: Evidence from China

Abstract

Online stock forums allow investors to share information and exchange opinions, which facilitates the incorporation of firm‐specific information into prices and reduces stock price synchronicity. However, prior research presents mixed evidence as to the value of messages in online forums. Using the information of the Eastmoney Guba online forum in China, we find a causal and negative relation between Guba messages and stock price synchronicity. The finding is robust after accounting for media reports and firm fixed effects and using both an instrumental variable analysis and an experimental design that exploits exogenous changes in the authenticity of Guba messages. We find the impact of Guba information is attributed to its roles in both information dissemination and investor interaction and is more pronounced for messages with a negative narrative tone. Additional tests suggest Guba messages improve firm information disclosure quality, reduce stock price crash risk and decrease stock return volatility synchronicity.

Stock Price Synchronicity and Technical Trading Effectiveness

“…An informative stock price is expected to reflect a firm's fundamental value and have less synchronicity with market-wide information (Roll, 1988;Morck, Yeung, & Yu, 2000). These pioneering papers motivated several follow-up studies that verified the relationship between synchronicity (i.e., IU) and capital allocation efficiency (Wurgler, 2000), analyst coverage (Piotroski & Roulstone, 2004;Chan & Hameed, 2006), future earnings (Durnev et al, 2003), transparency (Jin & Myers, 2006;Dasgupta et al, 2010), earnings management (Hutton, Marcus, & Tehranian, 2009), audit quality (Gul et al, 2010), liquidity (Chan et al, 2013), corporate governance (Boubaker, Mansali, & Rjiba, 2014), institutional investors' shareholding (Li, 2017), investor sentiment (Chue et al, 2019), media coverage (Dang et al, 2020), economic policy uncertainty (Shen et al, 2021), financial derivative usage (Su, Zhang, & Liu, 2022), messages in online stock forums (Huang et al, 2022), and stock market liberalization (Li et al, 2022).…”

A closer look at the relationship between firm-specific return variation and stock returns

“…It is employed as a primary proxy for stock price informativeness (e.g. Adra and Barbopoulos, 2023;Huang et al, 2022). However, in certain cases, absolute idiosyncratic volatility may be a more appropriate measure, particularly when the focus is on evaluating the magnitude of a firm's idiosyncratic risk independent of market conditions (e.g.…”

“…It is employed as a primary proxy for stock price informativeness (e.g. Adra and Barbopoulos, 2023; Huang et al. , 2022).…”

Exploring the Multidimensional Perspective of Retail Investors’ Attention: The Mediating Influence of Corporate Governance and Information Disclosure on Corporate Environmental Performance in China

“…Individual investors are important stakeholders of a company, and their attention and the resulting supervision can help alleviate the conflict of interest between management and stakeholders, optimizing the sustainable development objectives of the company. Previous literature, based on the governance effect of individual investors through social media, mostly unfolds from the perspectives of capital markets and corporate social responsibility [42,43]. To the best of the researcher's knowledge, the implications of corporate governance quality and retail investor attention on overall corporate environmental performance have not been examined.…”