Determinants of Poster Reputation on Internet Stock Message Boards

Abstract

I investigate the determinants of poster reputation in a user-rewarding reputation system on Thelion!WallStreetPit stock message board. My empirical analyses deal with two hypotheses: First, is a poster’s reputation affected by his/her characteristics at the time the message was posted? Second, is reputation also associated with the characteristics of the stock to which the message refers? Approach: To answer these two questions, I tested two sets of explanatory variables in relation to poster reputation in two fixed-effects panel regressions. Results: First, the poster’s popularity in the community, the poster’s sentiment, information quality not quantity and one day follow-up opinion on the stock all have positive impacts on the poster’s reputation; Second, recommending stocks with high price to earnings ratio and high institutional investors holding percentage reduce the chance of receiving reputation credits while promoting high liquidity stocks did the opposite. Conclusion: This study discarded light on the future construction of a credit-weighted sentiment index should the researchers consider weighing each poster’s sentiment based on its reputation. This study also helped us to build a more effective and better functional reputation system in the future. Finally, findings in this study allowed us to better examine the relationship between sentiment and stock returns in future studies.