information processing , Reddit Wallstreet Bets , wisdom of crowds , conversation networks , large language models , eigenvector centrality , high-frequency data
Abstract:
We study the relationship between investors’ social media activity and earnings announcement returns. To distinguish between information contained in peer-to-peer interaction and user-posted content, we analyze conversation networks on Reddit using centrality metrics from network science and classify user sentiment with large language models. We show that pre-announcement sentiment is positively associated with short-term cumulative abnormal returns only if it does not spark pre-announcement controversy. If pre-announcement controversy arises, we document a negative association. Our findings present a more nuanced view on the wisdom of crowds hypothesis, highlighting that peer-to-peer interaction on social media exhibits a pattern of normalization, and thus contains informational value beyond content
Zusätzliche Informationen:
Verfasser hier: Gaul, Johannes J.
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