The Attention-Weighted Asymmetric Stock Message Board Effect

This study is the first to investigate the renowned stock message board effect by controlling for both firm effects and board effects. Presently it is the most comprehensive study on how online stock discussion forums affect stock performance. More specifically, firm effects include firm size, earning growth rate, and media coverage intensity. Board effects include sentiment, number of messages, poster’s credibility, average message length, poster’s credibility, and most importantly, the drastically different levels of attention attracted by different websites. Stock performance factors include stock return, volatility, turnover, and bid-ask spread. First, by conducting event studies, I will look for a significant and positive market reaction on the discussion day for growth and small-cap stocks, and a smaller market reaction for large cap and value stocks on the heavy online discussion day. Second, by controlling for the attention level of each web forum, I will test if a stronger impact will be shown for posting activities on stock trading for all stocks, especially small-cap and growth stocks. Finally, I will test to see if a wellconstructed index of firm styles and investors’ attention combined can be used to form a sound trading strategy.