Abstract
We find that crowds' analyses of stocks, disclosed on a social trading platform, provide explanatory power for stock returns. Exploiting a novel dataset that contains more than 14.9 million individual stock assessments for 10,452 stocks over the period from August 1, 2007, to July 15, 2015, our study shows that social trading platforms add valuable information for explaining future and abnormal stock returns. This research contributes to the literature on social media and stock markets by (i) analyzing precise stock assessments disclosed on a social trading platform and (ii) providing new evidence for the wisdom of the crowds in financial markets. We provide comprehensive robustness tests of our results and show that the information provided by the social trading platform systematically differs from other risk factors.
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