Social Media Opinion Divergence And Analyst Forecasts Quality

The important assumption of CAPM is the homogeneous expectation of investors.However,it is difficult for investors to reach a consensus on stock returns in fact.In particular,individual investors are still the main investors in China’s capital market.Due to cognitive bias and limited rationality,individual investors have irrational behaviors and are more likely to have divergent opinions.At the same time,the EMH believes that new information disseminated through news,current events and product releases have an important impact on the company’s stock value.With the establishment of the public opinion pattern of "all media communication" in 2019,a variety of new tools for public opinion communication have emerged.The online social media is regarded as the "sensor" of the capital market.Taking the stock bar forum as an example,it is mainly participated by individual investors,and the content of its posts has not been reviewed by listed companies,which has certain fuzziness.With the“help” of online social media,differences of opinion are more likely to spread causing irrational behavior in groups.Thus,this thesis explore the market consequence of differences of opinion based on online social media,and it is important to guide the development of individual investors.The "Action Plan for Building a High Standard Market System" in 2021 proposes to promote the healthy development of the capital market and improve the social supervision mechanism.Analysts,being an important information intermediary in the capital market,actively perform external regulatory roles through both direct and indirect supervision.However,after reviewing the existing literature related to analysts,it is found that no paper has paid attention to the impact of differences in opinions on social media on analysts’ prediction behavior and quality.The premise for analysts to make prediction judgments is to obtain most of the information related to listed companies.So as information continues to be created and disseminated in a diverse way,does the ’voice’ of investors on online social media have an impact on analysts’ earnings forecasts? How can analysts effectively absorb,deal with and transfer information to the capital market in the face of high differences of opinion among individual investors to prove their role in information disclosure? This is a question worth exploring.Using the data of Chinese listed companies from 2011 to 2021,this thesis constructs an online social media opinion disagreement indicator from opinion disagreement in online social media by mining textual information from stock forums such as east money.com to explore whether online social media opinion disagreement attracts analysts’ attention and continuous tracking?If disagreements attract analysts’ attention,then in the complex information environment caused by disagreements,analysts use "rules of thumb" to simplify information to a greater extent and make faster and easier judgments,thereby reducing the quality of analysts’ forecasts;or in a complex market environment where analysts and their brokers face challenging circumstances,they must work harder to meet the information needs of investors and uphold their professional reputation.This requires them to "sail against the current" and increase the frequency of research and earnings amendment,ultimately leading to an improvement in the quality of forecasts.After theoretical analysis and empirical testing,this thesis concludes the following: First,the divergence in online social media has increased the tracking frequency of analysts.At the same time,in the complex market information environment,analysts are more inclined to "sail against the current",that is,increase their research frequency,make earnings amendment forecasts positively,and improve their forecasting accuracy.Second,considering the moderating effect of investors’ attention and the release of the Interpretation on the above relationship,the thesis found that investors’ attention has strengthened the impact of differences of opinion on the quality of analysts’ forecasts.At the same time,after the release of the Interpretation in 2013,divergence have more significant impact on the quality of analysts’ forecasts.Third,in terms of the path mechanism in which divergence affect the quality of analysts’ forecasts,analysts’ corporate site visit plays an intermediary role.To sum up,this thesis aims to focus on the impact of online social media opinion differences on analysts’ predictions.From the online social media divergence indicators construction,to their impact on analysts’ prediction behavior and quality,to the possible regulatory effects and mechanism,a series of robustness tests are conducted to solve possible endogenous problems.This thesis provides a relatively complete research framework,and complements the research gaps of opinions and analysts on online social media.In addition,in the era of online media,the spread of information is fast,and easily leads to the outbreak of irrational emotions.The conclusions of this thesis can provide some practical help for regulators to further regulate the governance of information dissemination channels,and also provide theoretical support for optimizing information dissemination and quality in the securities market.