Abstract
Investor disagreement affects security prices and trading volumes. Thus, understanding how disagreement evolves among investors is an important issue in finance. In this paper, as a direct proxy for the public observable investor disagreement, we define social dispersion as the extent of opinion dispersion in an Internet stock forum. Using this proxy, we further study how investor disagreement is evolved through learning, and how the learning might affect stock prices. We conduct an empirical study using Chinese stock data around the 2015 bubble. Our analysis reveals that social dispersion can coordinate investor beliefs and thus reduce overpricing and speculative trading. Second, social dispersion reflects the company’s fundamentals and helps to improve information quality. Third, our study illustrates that the existence of opinion leaders discourages social dispersion. In particular, the state-owned media plays a key role as an opinion leader in reducing the social dispersion that may affect stock bubbles.
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