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1 – 10 of over 4000Myungsun Kim, Robert Kim, Onook Oh and H. Raghav Rao
The purpose of this paper is to examine the role of online freelance stock analysts in correcting mispricing of hard-to-value firms during sentiment-driven market periods.
Abstract
Purpose
The purpose of this paper is to examine the role of online freelance stock analysts in correcting mispricing of hard-to-value firms during sentiment-driven market periods.
Design/methodology/approach
The sample covers 23,758 Seeking Alpha articles obtained for the period between January 2005 and September 2011. The authors use OLS regressions to test the stock market reaction around Seeking Alpha analysts’ reports. The information in online analysts’ reports is measured by the tone of stock articles posted in SeekingAlpha.com (SA).
Findings
The analysis reveals that the degree of negative tone of their stock articles is related to three-day stock returns around the article posting dates. It further reveals that the relation between these returns and prevailing market sentiment depends on firm-specific susceptibility to the market sentiment. The three-day stock returns are higher during low market sentiment periods for firms that are more susceptible to the market sentiment, hence, harder to value. The tone of the stock articles during low sentiment periods also predicts the news in the forthcoming earnings.
Practical implications
The findings help stock investors identify value-relevant information provided by online freelance stock analysts, particularly for hard-to-value stocks and during the low market sentiment period.
Originality/value
This study utilizes a unique dataset obtained from SA. This is the first paper to examine whether online analysts help investors correct potential undervaluation of hard-to-value firms during the low market sentiment period.
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Kingstone Nyakurukwa and Yudhvir Seetharam
The authors examine how financial analysts respond to online investor sentiment when updating recommendations for specific stocks in South Africa. The aim is to establish whether…
Abstract
Purpose
The authors examine how financial analysts respond to online investor sentiment when updating recommendations for specific stocks in South Africa. The aim is to establish whether online sentiment contains significant information that can influence analyst recommendations. The authors follow up the above by examining when online investor sentiment is most associated with analyst recommendation changes.
Design/methodology/approach
For online investor sentiment proxies, the authors make use of the social media sentiment and news media sentiment scores provided by Bloomberg Inc. The sample size includes all companies listed on the Johannesburg Stock Exchange All Share Index. The study uses traditional ordinary least squares to examine the relation at the mean and quantile regression to identify the scope of the relationship across the distribution of the dependent variable.
Findings
The authors find evidence that pre-event news sentiment significantly influences analyst recommendation changes while no significant relationship is found with the Twitter sentiment. Further analysis shows that news sentiment is more influential when the recommendation changes are moderate (in the middle of the conditional distribution of the recommendation changes).
Originality/value
The study is the one of the first to examine the association between online sentiment and analyst recommendation changes in an emerging market using high frequency data. The authors also make a direct comparison between social media sentiment and news media sentiment, some of the most used contemporary investor sentiment proxies.
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Rahul Kumar, Shubhadeep Mukherjee, Bipul Kumar and Pradip Kumar Bala
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…
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.
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Yuxuan Chang and Xiaoyang Zhao
This paper examines whether technological changes that promote communications between investors and managers help bridge the gap in the cost of equity capital among firms in…
Abstract
Purpose
This paper examines whether technological changes that promote communications between investors and managers help bridge the gap in the cost of equity capital among firms in different regions.
Design/methodology/approach
We use the online interaction platforms of listed firms in China and utilize brokerage presence (BP) to capture the geographic distribution of financial factors. We explore whether online interactions would reduce the cost of equity to a greater extent for firms located in low brokerage presence regions (hereafter “low-BP firms”) than those in high brokerage presence regions (hereafter “high-BP firms”).
Findings
We find low-BP firms benefit more from an improved information environment created by online interactions. We also find that posts about low-BP firms are more value-relevant and useful in processing corporate disclosures. Further, a higher number of interactions significantly enhances more informational efficiency for low-BP firms, and the effect of reducing the gap in financing costs is more pronounced when corporate information is complex.
Originality/value
We conclude that online interactions alleviate geography-induced information frictions and create a relatively level playing field for firms located in all regions.
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This paper aims to explore how sell-side analysts and salespeople make sense of uncertainty on their market knowledge, valuation and marketing outputs.
Abstract
Purpose
This paper aims to explore how sell-side analysts and salespeople make sense of uncertainty on their market knowledge, valuation and marketing outputs.
Design/methodology/approach
Data is collected by direct observations of and interviews with analysts and salespeople in the Turkish stock exchange, an emerging market with considerable global fund management activity.
Findings
Analysts face considerable uncertainty on their market value forecasts but dismiss it as local dynamics not incorporable to valuation practices in global sell-side business. Salespeople, despite paying more attention to such dynamics owing to their sales tasks, limit themselves to analyst output in marketing. Both actors recognise the importance of analyst work to be able to have “a right to speak” in global sell-side business.
Research limitations/implications
Changing market conditions and regulations since the time of study have been shaping analysts and salespeople work in global sell-side business, for example, the way sell-side is compensated by buy-side, buy-side’s move to receiving sell-side services from fewer brokers and hence shrinking sell-side teams. The paper does not address these. Nonetheless, it shows how valuation and marketing can be two distinct lines of work in sell-side business irrespective of market conditions and raises the question for future research as to how sell-side professionals manage this distinction, and how they make sense of and cope with broad market dynamics beyond sell-side and buy-side relations (e.g. automated trading machines, online retail trading).
Originality/value
The paper provides rare observation-based insights into analyst and salespeople work, including their sensemaking of uncertainty. It shows the importance of market identities and associated knowledge in valuation and marketing work in sell-side business.
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Sanjiv Sabherwal, Salil K. Sarkar and Ying Zhang
The purpose of this paper is to examine stocks that are most actively discussed by online posters and see if the messages posted about these stocks have information or if they are…
Abstract
Purpose
The purpose of this paper is to examine stocks that are most actively discussed by online posters and see if the messages posted about these stocks have information or if they are just noise.
Design/methodology/approach
This study uses messages posted on TheLion.com, which reports a real time list of the ten most actively discussed stocks. The stocks in this list at the daily market close during 2005‐2006 are examined. An event study is performed to estimate the daily abnormal returns on these stocks. Contemporaneous and lead–lag regressions of abnormal returns against message posting activities are performed.
Findings
Online posters prefer thinly traded micro‐cap stocks. On average, there is an abnormal return of 19.4 per cent on a stock the day it is one of the ten most talked about stocks. The number of messages posted about a stock on a given day is not only positively related with the stock's abnormal return on that day but it also positively predicts the next day's abnormal return.
Research limitations/implications
It may be interesting to examine if the investor sentiment expressed in online messages has predictive power for micro‐cap stocks.
Practical implications
The results provide evidence to regulators that online talk affects stock prices. They show investors that there are inefficiencies in the stock market. They also suggest that corporate managers, especially of small firms, should monitor the stock message boards.
Originality/value
This study focuses on the micro‐cap stocks favored by online posters and finds that online talk has the power to predict the next‐day returns.
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This paper aims to present the results of experiments with groups making online group stock price predictions and include the research process and a summary of the preliminary…
Abstract
Purpose
This paper aims to present the results of experiments with groups making online group stock price predictions and include the research process and a summary of the preliminary results. The overall objectives of the study are to assess the effect of individual and remote group decision-making approaches to stock price predictions, to assess whether a learning effect exists through the feedback loop of an e-Delphi process and to identify the underlying key mechanisms of the individual and of the group that influence the decision-making process.
Design/methodology/approach
The experiments consist of a pilot and a main run. The main run was performed with three lay groups (totaling 49 participants) and two expert groups (totaling ten financial analysts and other stock market professionals). The groups were benchmarked with actual market prices as well as with each other, over ten e-Delphi cycles (ten weeks). Each participant in the experiment was asked to provide an estimation of the movement (up or down) for one-week, one-month and three-month future periods for each share, as well as to enter a stock price prediction for a three-month period.
Findings
Although the pilot run has provided some indications that in certain situations and with careful group design, stock price predictions can be superior to the predictions of experts, the main experiment indicated a more differentiated picture and provided some information about the underlying decision-making process.
Originality/value
The paper presents influence factors and measures the impact of the group decision-making process of Internet communities focusing on stock trading, based on predicting share prices.
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Denis Cormier and Charlotte Beauchamp
This study aims to assess the informativeness of carbon emission data for the stock markets and the mediating role played by financial analysts and the quality of the governance…
Abstract
Purpose
This study aims to assess the informativeness of carbon emission data for the stock markets and the mediating role played by financial analysts and the quality of the governance on this issue.
Design/methodology/approach
Relying on structural equation modelling, the authors assess the relation between embedded CO2 disclosure or CO2 emissions disclosure and the stock market valuation (Tobin Q), considering the mediating roles played by financial analysts (external monitoring) and corporate governance (internal monitoring).
Findings
Results based on a sample of North American firms in the oil and gas industry are the following. The disclosure of embedded CO2 is negatively associated with a firm’s market value, but this association is mediated by analyst following and corporate governance. The disclosure of yearly CO2 emissions is also negatively related to stock market value, while corporate governance mediates this negative impact, and analysts following does not. Considering that yearly CO2 emissions represent short-term environmental risks, whereas embedded CO2 represents long-term environmental risks, it appears important to consider embedded CO2 when studying the impact of carbon disclosure on firm value. The authors also show that a firm’s environmental performance (measured by Carbon Disclosure Project – CDP) is positively associated with two mediating variables (i.e. analyst following and corporate governance).
Originality/value
The study results suggest that CO2 emissions information is less relevant than embedded CO2 in attracting financial analysts when they are assessing a firm’s value because it represents short-term environmental risks, whereas embedded CO2 represents long-term environmental risks. Therefore, the authors consider important to include embedded CO2 when studying the impact of environmental disclosure on a firm’s value.
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Xinmin Tian, Zhiqiang Zhang, Cheng Zhang and Mingyu Gao
Considering the role of analysts in disseminating information, the paper explains the idiosyncratic volatility puzzle of China's stock market. As the largest developing country…
Abstract
Purpose
Considering the role of analysts in disseminating information, the paper explains the idiosyncratic volatility puzzle of China's stock market. As the largest developing country, China's research can provide meaningful reference for the research of financial markets in other new countries.
Design/methodology/approach
From the perspective of behavior, establishing a direct link between individual investor attention and stock price overvaluation.
Findings
The authors find that there is a significant idiosyncratic volatility puzzle in China's stock market. Due to the role of mispricing, individual investor attention significantly enhances the idiosyncratic volatility effect, that is, as individual investor attention increases, the greater the idiosyncratic volatility, the lower the expected return. Attention can explain the idiosyncratic volatility puzzle in China's stock market. In addition, due to the role of information production and dissemination, securities analysts can reduce the degree of market information asymmetry and enhance the transparency of market information.
Originality/value
China is the second largest economy in the world, and few scholars analyze it from the perspective of investors' attention. The authors believe this paper has the potential in contributing to the academia.
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Waqar Haider Hashmi, Nazima Ellahi, Saima Ehsan and Ajmal Waheed
The purpose of this study is to highlight key issues pertaining to making use of Islamic equity indices and proposing possible solutions to address the problems faced in…
Abstract
Purpose
The purpose of this study is to highlight key issues pertaining to making use of Islamic equity indices and proposing possible solutions to address the problems faced in advancement of the concept of Shariah investing (SI) with the aim to advance the discourse on the subject.
Design/methodology/approach
Online focus group discussion (FGD) was carried out in which ten Islamic finance researchers and analysts belonging to institutions considered as authority on the subject matter participated to share their viewpoints on Islamic equity indices. Content analysis on the collected data of FGD was carried out which has revealed six key themes.
Findings
Six broader themes were identified based on the analysis of FGD, which includes criteria for constructing Islamic equity indices, utilization of Islamic equity indices for comparison with conventional stock indices, stock market efficiency perspectives, reason for integration of different equity markets, investors’ awareness of SI and future directions of Islamic equity indices. Results of the study indicate that Islamic finance researchers and analysts opined that there is a need for revising the criteria for construction of Islamic equity indices. There are conflicting viewpoints regarding performance and efficiency of Islamic indices in comparison with conventional indices and main reasons for stock market integration are trade liberalization, globalization and other factors. Moreover, there is a need for making investors and other market players aware about the attractiveness of Islamic indices from investing point of view.
Originality/value
Based on this extensive literature review and as highlighted by Masih et al. (2018) in their recap of literature on Islamic equity indices indicating that there are bulk of empirical studies carried in the past in the domain, however, there is a dearth of theoretical and qualitative studies. Hence, this preliminary qualitative study not only makes theoretical contribution but also deploys FGD, which is rarely used in the similar context, and offers candid views of the participants on key issues pertaining to Islamic equity indices. This lends novelty to this study.
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