Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/327108 
Year of Publication: 
2025
Series/Report no.: 
ZEW Discussion Papers No. 25-040
Publisher: 
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung, Mannheim
Abstract: 
We study the relationship between investors' social media activity and earnings announcement returns. To distinguish between information contained in peer-to-peer interaction and user-posted content, we analyze conversation networks on Reddit using centrality metrics from network science and classify user sentiment with large language models. We show that pre-announcement sentiment is positively associated with short-term cumulative abnormal returns only if it does not spark pre-announcement controversy. If pre-announcement controversy arises, we document a negative association. Our findings present a more nuanced view on the wisdom of crowds hypothesis, highlighting that peer-to-peer interaction on social media exhibits a pattern of normalization, and thus contains informational value beyond content.
Subjects: 
Information Processing
Reddit Wallstreet Bets
Wisdom of Crowds
Conversation Networks
Large Language Models
Eigenvector Centrality
High-frequency Data
JEL: 
G12
G14
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.