Latest Projects

Fake News, Investor Attention, and Market Reaction

Information Systems Research forthcoming

Authors: Jonathan Clarke, Hailiang Chen, Ding Du, and Yu Jeffrey Hu

Abstract: Does fake news in financial markets attract more investor attention and have a significant impact on stock prices? We use the SEC crackdown of stock promotion schemes in April 2017 to examine investor attention and the stock price reaction to fake news articles. Using data from Seeking Alpha, we find that fake news stories generate significantly more attention than a control sample of legitimate articles. We find no evidence that article commenters can detect fake news. Seeking Alpha editors have only modest ability to detect fake news. The broader stock market appears to price fake news correctly. The stock price reaction to the release of fake news is not significantly different than a matched control sample over short and longer-term windows. We conclude by presenting a machine learning algorithm that is successful in identifying fake news articles.

 

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Signal or Noise in Social Media Discussions: The Role of Network Cohesion in Predicting the Bitcoin Market

Journal of Management Information Systems forthcoming

Authors: Peng Xie, Hailiang Chen, and Yu Jeffrey Hu

Abstract: Prior studies have shown that social media discussions can be helpful in predicting price movements in financial markets. With the increasingly large amount of social media data, how to effectively distinguish value-relevant information from noise remains an important question. We study this question by investigating the role of network cohesion in the relationship between social media sentiment and price changes in the Bitcoin market. As network cohesion is associated with information correlation within the discussion network, we hypothesize that less cohesive social media discussion networks are better at predicting the next-day returns than more cohesive networks. Both regression analyses and trading simulations based on data collected from Bitcointalk.org confirm our hypothesis. Our findings enrich the literature on the role of social media in financial markets and provide actionable insights for investors to trade based on social media signals.

 

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Listening in on investors' thoughts and conversations

Authors: Hailiang Chen and Byoung-Hyoun Hwang

Abstract: Utilizing aggregated server log data from one of the most popular investment-related websites in the United States, we study what types of stock-opinion articles investors most frequently read and what types of articles they most frequently share with other investors. Our analysis reveals evidence of strong “social transmission biases”: The articles that investors, themselves, choose to consume and the articles that they choose to share are often of completely opposite type. Further, the articles that investors keep to themselves significantly more accurately predict returns than the articles that they share. Results from additional analyses suggest that stocks with a high number of shares become overpriced; this overpricing subsequently reverses.

 

         

The Causal Effect of Video Streaming on DVD Sales: Evidence from a Natural Experiment

Authors: Yinan Yu, Hailiang Chen, Chih Hung Peng, and Patrick Y. K. Chau


Media Coverage: International Business Times (IBTimes) TechSpot

Abstract: Video streaming services recently become a revenue driver of the home entertainment industry. By contrast, revenue from physical media continuously declines. Content owners, such as movie studios, face the important question of whether streaming media cannibalize the sales of physical media and to what extent. We answer these questions by exploiting a natural experiment that occurred on October 1, 2015 when Epix switched its streaming partner from Netflix to Hulu. This event created an exogenous shock that reduced the streaming availability of Epix’s content because of the significant difference in the market shares of the two video streaming sites. This occurrence allowed us to investigate the causal effect of streaming services on physical DVD sales. Our difference-in-difference analyses show that the decline in the streaming availability of Epix’s content causes a 24.7% increase in their DVD sales in the three months after the event. Our results validate the industry’s concern that video streaming services displace physical DVD sales. In addition, we find that cannibalization between the two media is stronger for DVDs released more recently and for movies with better box office performances. This study contributes to the understanding of the competition between streaming media and physical media and provides important managerial implications for content owners in selecting appropriate movies for streaming.

 
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Product Fit Uncertainty and Interplay between Traditional Advertising and Social Media Marketing

Authors: Yinan Yu, Liangfei Qiu, Hailiang Chen, and Benjamin P. C. Yen

Abstract: Although brands have widely adopted multiple marketing communication media, our understanding of how to effectively coordinate traditional advertising and social media marketing to improve business outcomes is still limited. This paper examines the role of product fit uncertainty in determining how traditional advertising, social media marketing, and their interaction affect product sales differently in the context of the motion picture industry. We first find that traditional advertising is more effective for products with a lower level of fit uncertainty, while social media marketing benefits products with a higher level of fit uncertainty more. More importantly, the interplay between traditional advertising and social media marketing is more likely to be substitutive for low fit uncertainty products and complementary for high fit uncertainty products. Consistent with this finding, we show that marketers’ social media posts featuring experience attributes have a larger effect on the sales of high fit uncertainty products, while social media posts featuring search attributes benefit low fit uncertainty product more. This study sheds lights on how firms can align their multi-channel marketing strategy with product characteristics and effectively communicate the relevant product information with customers to enhance sales.

 

Download this working paper at SSRN