Product Description
Publication Date: January 01, 2024
Source: Rotman Management Magazine
More than one third of new investors use social media to research investment advice. If such advice is independently produced by a variety of different contributors, it can benefit investors, because research shows that averaging independent judgments generally improves accuracy. This is known as 'the wisdom-of-the-crowd effect.' However, social media platforms disseminate information using engagement algorithms that are influenced by popularity bias. The authors share findings from their research, which reveals that information on social media displays excessive optimism about future outcomes on earnings announcements and leads to price run-ups.
