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Do investors post messages differently from mobile devices? The correlation between mobile Internet messages posting and stock returns

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Abstract

Mobile Internet has become a popular channel for investors to share their information and ideas about investment. This paper investigates the relation between frequency of mobile Internet messages and subsequent stock returns. We find that firms with higher proportion of mobile Internet messages on average earn a significant return premium even after controlling for well-known risk factors. Moreover, the marginal effect of mobile Internet messages is more pronounced among stocks in weaker information environments (i.e., higher fraction of individual ownership and lower analysts following). Further results suggest this correlation is more likely to be driven by “noise” rather than “information.” We also provide evidence that the lack of liquidity can explain the persistence of the correlation between mobile Internet messages and stock returns. Our findings highlight the importance for financial market participants to consider the peer-based opinions from mobile Internet.

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Notes

  1. During our 2014.1.1–2015.3.31 sample period, if you reward other users, you need at least one “Snowball Money” (0.1 RMB).

  2. Rewards from Snowball Finance (xueqiu.com) mean that users can sponsor others based on the quality of messages by “Snowball money” (One “Snowball Money” is worth 0.1 RMB).

  3. We repeated the analysis with the Second Level-CSRC Industry Classification Standard and obtained similar results.

  4. In contrast, the following papers argue that greater idiosyncratic volatility captures more value-relevant information and less noise (Wurgler 2000; Durnev et al. 2003; Piotroski and Roulstone 2004; Bakke and Whited 2010).

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Acknowledgements

We would like to thank Diefeng Peng, Daniel Houser, and Erte Xiao for helpful comments and suggestions. We also thank Ganggang Guo for outstanding assistance with the stock messages collection process from Snowball Finance platform. Besides, we thank China Scholarship Council (CSC), Project (71673306, 71301169, 71501193, 71372063) supported by the National Natural Science Foundation of China, Project of the Ministry of Education of China(14YJC630133) and Project (17CGL056) supported by the National Social Science Foundation of China.

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Authors and Affiliations

  1. South China University of Technology, GF Securities, Guangzhou, China

    Lixing Mei

  2. Business School, Central South University, Changsha, China

    Yulei Rao & Jianxin Wang

  3. WHU-Otto Beisheim School of Management, Vallendar, Germany

    Mei Wang

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  1. Lixing Mei
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  2. Yulei Rao
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  4. Jianxin Wang
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Correspondence to Lixing Mei.

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Mei, L., Rao, Y., Wang, M. et al. Do investors post messages differently from mobile devices? The correlation between mobile Internet messages posting and stock returns. Int Rev Econ 66, 423–452 (2019). https://doi.org/10.1007/s12232-019-00329-6

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