Stock Mispricing, Hard-to-value Stocks and the Influence of Internet Stock Message Boards

Xiong Xiong, Yongqiang Meng, Nathan Joseph, Dehua Shen

Research output: Contribution to journalArticle

Abstract

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.
Original languageEnglish
Article number101576
Number of pages14
JournalInternational Review of Financial Analysis
Volume72
Early online date8 Sep 2020
DOIs
Publication statusE-pub ahead of print - 8 Sep 2020

Bibliographical note

NOTICE: 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/

Keywords

  • Internet stock message board
  • Firm-specific investor sentiment
  • Sentiment-driven mispricing
  • Behavioral biases

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