Social transmission bias: evidence from an online investor platform

Pengfei Sui and Baolian Wang

Review of Finance, 2025, vol. 29, issue 6, 1663-1697

Abstract: Using data from a Twitter-like investor social platform, we document evidence consistent with self-enhancing transmission bias. We find investors are more likely to post about their better-performing stocks. Their followers are more likely to buy the posted stocks than other non-posted stocks. The effect of the postings on follow-up purchases is consistent with an attention-based interpretation: the postings bring the discussed stocks into the followers’ choice set and increase their purchases. We also find that postings’ effect on follow-up purchases is related to postings’ perceived credibility. The performance-postings relationship is stronger among more volatile stocks and the relationship between postings and follow-up purchases is stronger among stocks with higher recent returns, shedding light on the spread of high-variance and extrapolative strategies. We also document that the social network features influential nodes.

Keywords: social network; self-enhancing transmission bias; social trading platform (search for similar items in EconPapers)
JEL-codes: D91 G41 (search for similar items in EconPapers)
Date: 2025
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