Stock market reactions to social media: Evidence from WeChat recommendations

Yuzhao Zhang and Haifei Liu

Physica A: Statistical Mechanics and its Applications, 2021, vol. 562, issue C

Abstract: This paper examines the market behavior of stocks that are favorably mentioned on official WeChat account (OWA). To the best of our knowledge, we are the first to investigate market reactions to recommendations on WeChat. The empirical results show that there is a significantly positive abnormal return and excess trading volume on the publication day. Moreover, the cumulative average abnormal return for OWA completely reverses in a short time, which supports the price pressure hypothesis. Additional analyses reveal that market reactions in the smaller firms are significantly greater than those in the largest firms on the publication day. Finally, we preclude possibilities that market reactions on the event day are induced by the secondary dissemination of analyst recommendations, firm-specific news releases, media coverage, and previous positive significant abnormal returns.

Keywords: WeChat recommendations; Price pressure hypothesis; Market reactions; Information diffusion; Social media (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:562:y:2021:i:c:s0378437120307147

DOI: 10.1016/j.physa.2020.125357

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