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Navigating through the Crowd: How Do Features of Social Media Platforms Influence Investor Judgments?

Fri, October 6, 3:45 to 5:15pm, TBA

Abstract

Technological innovations have created a significant shift in how investment information is created, disseminated, and reviewed. Social media platforms are now an important source of fundamental investment analysis for investors. These platforms rely critically on their networks of users, both for the production and potential oversight of published analysis. We use an experiment to examine how three features of social media platforms—potential network oversight, contributor publication experience, and contributor ownership status—interact to influence investors’ perceptions of contributor credibility and their resulting investment judgments. We find that each of the three platform features can serve as a credibility cue for investors. We also find that one positive credibility cue is sufficient to increase investor perceptions of contributor credibility and willingness to invest, with a non-ownership disclosure leading to the most substantial increase. However, once a positive credibility cue is present, additional credibility cues have little influence on investors. Our findings have important implications for investors, social media platforms, and regulators, providing evidence on how investors assess credibility for an important new information intermediary and when investors’ judgments are likely to be influenced.

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