Re the debate on whether what is posted on HC can have any...

Re the debate on whether what is posted on HC can have any influence on share price, the weight of research suggests that it can.

The impact of social media and stock forums on investment behaviour and stock prices is a growing area of research within behavioural finance. You can find numerous papers on this subject from around the globe, including Australia and New Zealand. Some have even incorporated Hot Copper in their analysis.

Below are some of the findings from different research papers.

• stocks of low capitalization, younger, unprofitable, high volatility, non-dividend paying, growth companies, or stocks of firms in financial distress, are likely to be disproportionately sensitive to broad waves of investor sentiment
• social media sentiment influences stock markets
• social interaction does not trigger a rational reaction but rather influences sentiment among followers. Results are mainly driven by small investors that are typically considered to be unsophisticated individuals
• higher message board activity quickly reflects into the prices of small cap stocks. Large stocks are not found to be affected by message board activity
• there is evidence that price decreases lead to more pessimistic commentaries
• negative social sentiment had a cumulative impact on a stock’s trading volume and the cumulative impact of negative sentiment was significant
• uninformed traders seem easily swayed by social sentiment, specifically negative sentiment. They responded by herding to chase trends with respect to social signals
• sentiment from news media impacts stock prices but sentiment from social media has a long-lasting and stronger effect on returns than sentiment from news media
• analysis provides direct empirical evidence that enthusiasm (and pessimism) spreads from person to person and affects individuals’ investment decisions
• in economic terms, the effect of negative words is about 50% larger than the effect of positive words. Increasing the fraction of positive words in a comment by one percentage point increases net flows by 2.1% on average, while increasing the faction of negative words by one percentage point reduces net flows by 3.2% on average
• during periods of rapidly falling prices, high volatility and uncertainty there is increased potential for market manipulation
• comments not only lead to higher inflows but also trigger higher outflows