Rumours built on quicksand: evidence on the nature and impact of message board postings in modern equity markets

James Bowden, Bruce Burton, David Power

Research output: Contribution to journalArticle

Abstract

It is argued that internet-based short-sellers take advantage of asymmetric information, publishing research online which often values shares in a target company at a large discount to their current price. The increasing popularity of online dissemination of information, coupled with evidence that individuals are prone to behave in a herd-like fashion suggests the potential for significant volatility in the share price of a company. In this paper, a dataset of 12,616 financial message board postings is employed to examine patterns in online activity following the publication of a research note targeting a specific firm by an internet-based short-seller. Identifiable trends in investor behaviour, indicative of community contagion, are shown with group sentiment shifting over time. The findings have implications for regulators’ attempts to adapt to an online environment in which information – and misinformation – can be rapidly incorporated into share prices.
LanguageEnglish
Pages544-564
Number of pages21
JournalEuropean Journal of Finance
Volume24
Issue number7-8
DOIs
Publication statusPublished - 14 Feb 2017

Fingerprint

Equity markets
Rumor
Seller
Share prices
World Wide Web
Sentiment
Targeting
Asymmetric information
Contagion
Investor behavior
Dissemination
Discount

Keywords

  • internet-based short-seller
  • financial regulation
  • lower-tier financial markets
  • market efficiency

Cite this

@article{ff0f881a52d14f289ddcea67ee3503f7,
title = "Rumours built on quicksand: evidence on the nature and impact of message board postings in modern equity markets",
abstract = "It is argued that internet-based short-sellers take advantage of asymmetric information, publishing research online which often values shares in a target company at a large discount to their current price. The increasing popularity of online dissemination of information, coupled with evidence that individuals are prone to behave in a herd-like fashion suggests the potential for significant volatility in the share price of a company. In this paper, a dataset of 12,616 financial message board postings is employed to examine patterns in online activity following the publication of a research note targeting a specific firm by an internet-based short-seller. Identifiable trends in investor behaviour, indicative of community contagion, are shown with group sentiment shifting over time. The findings have implications for regulators’ attempts to adapt to an online environment in which information – and misinformation – can be rapidly incorporated into share prices.",
keywords = "internet-based short-seller, financial regulation, lower-tier financial markets, market efficiency",
author = "James Bowden and Bruce Burton and David Power",
year = "2017",
month = "2",
day = "14",
doi = "10.1080/1351847X.2017.1288647",
language = "English",
volume = "24",
pages = "544--564",
journal = "European Journal of Finance",
issn = "1351-847X",
number = "7-8",

}

Rumours built on quicksand : evidence on the nature and impact of message board postings in modern equity markets. / Bowden, James; Burton, Bruce; Power, David.

In: European Journal of Finance, Vol. 24, No. 7-8, 14.02.2017, p. 544-564.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Rumours built on quicksand

T2 - European Journal of Finance

AU - Bowden, James

AU - Burton, Bruce

AU - Power, David

PY - 2017/2/14

Y1 - 2017/2/14

N2 - It is argued that internet-based short-sellers take advantage of asymmetric information, publishing research online which often values shares in a target company at a large discount to their current price. The increasing popularity of online dissemination of information, coupled with evidence that individuals are prone to behave in a herd-like fashion suggests the potential for significant volatility in the share price of a company. In this paper, a dataset of 12,616 financial message board postings is employed to examine patterns in online activity following the publication of a research note targeting a specific firm by an internet-based short-seller. Identifiable trends in investor behaviour, indicative of community contagion, are shown with group sentiment shifting over time. The findings have implications for regulators’ attempts to adapt to an online environment in which information – and misinformation – can be rapidly incorporated into share prices.

AB - It is argued that internet-based short-sellers take advantage of asymmetric information, publishing research online which often values shares in a target company at a large discount to their current price. The increasing popularity of online dissemination of information, coupled with evidence that individuals are prone to behave in a herd-like fashion suggests the potential for significant volatility in the share price of a company. In this paper, a dataset of 12,616 financial message board postings is employed to examine patterns in online activity following the publication of a research note targeting a specific firm by an internet-based short-seller. Identifiable trends in investor behaviour, indicative of community contagion, are shown with group sentiment shifting over time. The findings have implications for regulators’ attempts to adapt to an online environment in which information – and misinformation – can be rapidly incorporated into share prices.

KW - internet-based short-seller

KW - financial regulation

KW - lower-tier financial markets

KW - market efficiency

UR - https://discovery.dundee.ac.uk/en/publications/rumours-built-on-quicksand-evidence-on-the-nature-and-impact-of-m

U2 - 10.1080/1351847X.2017.1288647

DO - 10.1080/1351847X.2017.1288647

M3 - Article

VL - 24

SP - 544

EP - 564

JO - European Journal of Finance

JF - European Journal of Finance

SN - 1351-847X

IS - 7-8

ER -