Do stock bulletin board systems (BBS) contain useful information? A viewpoint of interaction between BBS quality and predicting ability

Xiong Xiong, Chunchun Luo, Ye Zhang and Shen Lin

Accounting and Finance, 2019, vol. 58, issue 5, 1385-1411

Abstract: This study explores whether information on internet stock bulletin board systems (BBS) is valuable for stock return prediction, taking advantage of data derived from the biggest stock BBS in China. Using a text classification algorithm, we find the online messages significantly predict stock return with negligible R‐squared. However, we find that accuracy of individual BBS posts is below 50 percent and there is no distinction at prediction accuracy between high‐ and low‐quality stock BBS. Due to the autocorrelation of stock returns, we argue that BBS predicts stock returns because of its reflection on the simultaneous stock return rather than revelation on valuable information.

Date: 2019
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