Stock mispricing, hard-to-value stocks and the influence of internet stock message boards

Xiong Xiong, Yongqiang Meng, Nathan Lael Joseph and Dehua Shen

International Review of Financial Analysis, 2020, vol. 72, issue C

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.

Keywords: Internet stock message board; Firm-specific investor sentiment; Sentiment-driven mispricing; Behavioral biases (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:72:y:2020:i:c:s1057521920302209

DOI: 10.1016/j.irfa.2020.101576

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