The democratization of investment research and the informativeness of retail investor trading

Michael Farrell, T. Clifton Green, Russell Jame and Stanimir Markov

Journal of Financial Economics, 2022, vol. 145, issue 2, 616-641

Abstract: We study the effects of social media on the informativeness of retail trading. Our identification strategy exploits the editorial delay between report submission and publication on Seeking Alpha, a popular crowdsourced investment research platform. We find the ability of retail order imbalances to predict the cross-section of stock returns and cash-flow news increases sharply in the intraday post-publication window relative to the pre-publication window. The findings are robust to controlling for report tone and stronger for reports authored by more capable contributors. The evidence suggests that recent technology-enabled innovations in how individuals share information help retail investors become better informed.

Keywords: Investment research; Seeking alpha; Retail investors; Informed trading (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:145:y:2022:i:2:p:616-641

DOI: 10.1016/j.jfineco.2021.07.018

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