News Diffusion in Social Networks and Stock Market Reactions

David Hirshleifer, Lin Peng, Qiguang Wang

Research output: Working paper


We study how the social transmission of public news influences investors’ beliefs and securities markets. Using data on investor social networks, we find that earnings announcements from firms in higher-centrality locations generate stronger immediate price, volatility, and trading volume reactions. Post announcement, such firms experience weaker price drift and faster volatility decay but higher and more persistent volume. This evidence suggests that greater social connectedness promotes timely incorporation of news into prices, but also opinion divergence and excessive trading. We propose the social churning hypothesis and present supporting evidence with granular data from StockTwits messages and household trading records.
Original languageEnglish
PublisherNational Bureau of Economic Research
Number of pages80
Publication statusPublished - Apr 2023

Publication series

NameNBER Working Paper Series


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