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Deriving wisdom from virtual investing communities: an alternative strategy to stock recommendations

Rahul Kumar (Department of Information Systems, Indian Institute of Management Sambalpur, Sambalpur, India)
Shubhadeep Mukherjee (Department of Operations, Symbiosis Institute of Business Management Bengaluru, Symbiosis International University, Bangalore, India)
Bipul Kumar (Head of Artificial Intelligence, Kaliber Labs, Hyderabad, India)
Pradip Kumar Bala (Department of Information Systems, Indian Institute of Management Ranchi, Ranchi, India)

Journal of Modelling in Management

ISSN: 1746-5664

Article publication date: 14 September 2020

Abstract

Purpose

Colossal information is available in cyberspace from a variety of sources such as blogs, reviews, posts and feedback. The mentioned sources have helped in improving various business processes from product development to stock market development. This paper aims to transform this wealth of information in the online medium to economic wealth. Earlier approaches to investment decision-making are dominated by the analyst's recommendations. However, their credibility has been questioned for herding behavior, conflict of interest and favoring underwriter's firms. This study assumes that members of the online crowd who have been reliable, profitable and knowledgeable in the recent past will continue to be so soon.

Design/methodology/approach

The authors identify credible members as experts using multi-criteria decision-making tools. In this work, an alternative actionable investment strategy is proposed and demonstrated through a mock-up. The experimental prototype is divided into two phases: expert selection and investment.

Findings

The created portfolio is comparable and even profitable than several major global stock indices.

Practical implications

This work aims to benefit individual investors, investment managers and market onlookers.

Originality/value

This paper takes into account factors: the accuracy and trustworthiness of the sources of stock market recommendations. Earlier work in the area has focused solely intelligence of the analyst for the stock recommendation. To the best of the authors’ knowledge, this is the first time that the combined intelligence of the virtual investment communities has been considered to make stock market recommendations.

Keywords

Citation

Kumar, R., Mukherjee, S., Kumar, B. and Bala, P.K. (2020), "Deriving wisdom from virtual investing communities: an alternative strategy to stock recommendations", Journal of Modelling in Management, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JM2-09-2019-0229

Publisher

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Emerald Publishing Limited

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