Abstract
Problem statement: I investigate the determinants of poster reputatio n in a user-rewarding reputation system on Thelion!WallStreetPit stock me ssage board. My empirical analyses deal with two hypotheses: First, is a poster's reputation affecte d by his/her characteristics at the time the messag e was posted? Second, is reputation also associated w ith the characteristics of the stock to which the message refers? Approach: To answer these two questions, I tested two sets o f explanatory variables in relation to poster reputation in two fixed-effec ts panel regressions. Results: First, the poster's popularity in the community, the poster's sentiment , information quality not quantity and one day follow-up opinion on the stock all have positive im pacts on the poster's reputation; Second, recommending stocks with high price to earnings rat io and high institutional investors holding percentage reduce the chance of receiving reputatio n credits while promoting high liquidity stocks did the opposite. Conclusion: This study discarded light on the future construct ion of a credit-weighted sentiment index should the researchers consider wei ghing each poster's sentiment based on its reputation. This study also helped us to build a mo re effective and better functional reputation syste m in the future. Finally, findings in this study allo wed us to better examine the relationship between sentiment and stock returns in future studies.
Highlights
The Internet stock message boards serve as an excellent tool for investors to obtain stock information and exchange their opinions and almost freely
The Internet stock message boards are flushed with noise[2,3,5]
How can the anonymity be mitigated on Internet stock message boards? Recent practice is to allow those who consume the information to identify and reward poster for useful information
Summary
The Internet stock message boards serve as an excellent tool for investors to obtain stock information and exchange their opinions and almost freely. Reputation systems are often useful in large online financial communities in which participants may have the opportunity to interact with posters with whom they have no prior experience In such a situation, it is helpful to base the trading decision whether or not to follow that user’s stock recommendation on the prior experiences of other users. I investigate an Internet stock message board-Thelion.com, whose reputation system is based upon other users’ rewards. Register multiple accounts from the same IP (Internet Protocol) address is subject to later deletion by the forum administrator Such unique structure of the reputation system reduces the probability that forum participants register multiple accounts to self donate in order to boost their reputation credits. My empirical analyses deal with two hypotheses: First, is a poster’s reputation affected by the characteristics of the poster at the time the message was posted, such as the poster’s average number of messages posted and average length of each message? Second, is the reputation associated with the characteristics of the stock which the poster recommends, such as the stock’s fundamental and technical aspects? While it is not immediately clear how a reputation is built, according to previous literature, I anticipate that some factors from both hypotheses will have significant contribution to one’s reputation on the Internet stock message board
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