Does social media information affect individual investor disposition effect? Evidence from Xueqiu

Paper: arXiv 2605.05814

Authors: Siliu Chen, Fei Ren

Abstract

The irrational behavior of investors selling profitable assets too early while holding onto losing assets for too long is known as the disposition effect. Due to the development of the Internet, the information environment for individual investors has been greatly improved. As an important source of information for individual investors, whether social media can improve investors’ behavioral biases and return to rational expectations is a question worth studying. Based on the post data and actual trading data of the social investment platform Xueqiu.com, this paper studies the impact of social media information on the disposition effect of individual investors. The research results show that social media information can significantly reduce the disposition effect. Furthermore, it is through negative information that social media information reduces the disposition effect. When presented with negative information, individual investors will gradually become more rational in adjusting their positions. At the individual level, factors such as investment experience, users followed, region, and gender can all influence the effectiveness of the information acquired by individual investors in reducing the disposition effect.

Complexity vs Empirical Score

• Math Complexity: 3.0/10
• Empirical Rigor: 7.5/10
• Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper provides a strong empirical analysis leveraging unique social media and transaction datasets from Xueqiu to examine behavioral finance biases. While it relies primarily on econometric regression models rather than advanced mathematical derivations, its empirical rigor and novel insight into how negative sentiment reduces the disposition effect make it a valuable contribution.

Research Flowchart

  flowchart TD
    A[Research Goal: Does social media information reduce individual investor disposition effect?] --> B[Data Collection: Xueqiu.com posts & actual trading data]
    B --> C[Methodology: Analyze sentiment & measure disposition effect]
    C --> D[Mechanism Analysis: Evaluate impact of positive vs. negative information]
    C --> E[Heterogeneity Testing: Analyze user demographics & experience]
    D & E --> F[Main Outcome: Social media info significantly reduces disposition effect]
    F --> G[Key Finding: Driven primarily by negative info inducing rational position adjustments]