In recent years, the predictability of Internet Stock Message Board (ISMB) postings has been intensively investigated. However, the underlying mechanisms driving the ISMB postings and their influence on hard-to-value stocks remain largely unexplored. In this paper, we show that the information contained in the process underlying ISMB postings contains characteristics that are associated with investor sentiment. In particular, we show that short-term ISMB postings contain persistence in hard-to-value stocks and stocks with high ISMB postings underperform in the long-term. Our empirical findings indicate that ISMB postings proxy reasonably well for firm-specific investor sentiment and are associated with temporary mispricing in stocks.
Bibliographical noteNOTICE: this is the author’s version of a work that was accepted for publication in International Review of Financial Analysis. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Financial Analysis, 72, (2020) DOI: 10.1016/j.irfa.2020.101576
© 2020, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
- Internet stock message board
- Firm-specific investor sentiment
- Sentiment-driven mispricing
- Behavioral biases
Xiong, X., Meng, Y., Joseph, N., & Shen, D. (2020). Stock Mispricing, Hard-to-value Stocks and the Influence of Internet Stock Message Boards. International Review of Financial Analysis, 72, . https://doi.org/10.1016/j.irfa.2020.101576