To what extent do network effects moderate the relationship between social media propagated news and investors’ perceptions?

Noushad khan Feroz, Gazi Hassan () and Michael Cameron

Research in Economics, 2022, vol. 76, issue 3, 170-188

Abstract: As a prominent social media tool, Twitter enables prompt dissemination of financial news and information, which can have a substantial impact on investors’ perceptions and decision-making processes. The propagation of financial news and information through Twitter can either positively or negatively affect investors’ perceptions. As per network theory, the impact of information on one's perception and behavior is known as the network effect. Since Twitter is also a network, we tried to contribute more to this theory in this study by considering other factors that can have an impact on the perceptions of investors. We argue that the impact of financial information and news on investors’ perceptions is moderated by other factors such as connectivity, social ties, and network size of the network. To establish the links between them, we considered three key factors in investors’ networks: (1) network connectivity (network structure); (2) social ties circle (friends, family, colleagues); and (3) size of the network (number of contacts). The results of this study indicate that highly connected investors receive more information and hence, the impact of news is derived from the connectivity of investors within the network. The findings of the study also show that the social ties circle plays a crucial role in determining the impact of the news. The findings further indicate that the impact of news on investors’ perceptions also depends on the theme of the news.

Keywords: Stock market; Financial news; Investor perceptions; Social network; Network size; Network structure; Social ties (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:76:y:2022:i:3:p:170-188

DOI: 10.1016/j.rie.2022.07.007

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