e-Information: a clinical study of investor discussion and sentiment

In this clinical study, we examine the information flow for four stocks over seven months to trace the relationship between on-line discussion, news activity and stock price movements. On-line discussions are characterized by numerous unsubstantiated rumors, substantial on-point exchanges and quick dissemination of imminent and recently-released information. An interview with a frequent poster reveals the benefits and costs he perceived from his participation in on-line discussions. Using various language processing routines, we create sentiment and disagreement measures based on the comments posted on the message boards. We combine this “e- Information” with other components of the traditional information set to characterize public information flow. We analyze the determinants of sentiment and disagreement, and trace links between news, e-Information and stock returns. This intensive clinical study of on-line discussions suggests mechanisms whereby individual investors and groups analyze and digest company information.