Warrington finance professor’s research named the best in behavioral finance

Baolian Wang's award-winning research notes that while social media may be a popular resource for investors, the investment information users post on social media should be taken with a grain of salt.

Bank of America Associate Professor of Finance Baolian Wang’s research was named the best in behavioral finance at the 2024 China Financial Research Conference. The research paper was selected for the prestigious prize in academic financial research by a panel of international scholars representing universities across the United States, Europe and Asia.  

“I am excited and honored to receive this award,” said Wang. “Behavioral finance is my main research area. Receiving the best paper in this field means a lot to me.”

Social media has become an increasingly utilized resource by investors who are looking for stock trading insights. Wang’s award-winning research, “Social Transmission Bias: Evidence from an Online Investor Platform,” notes that while social media may be a popular resource, the investment information users post on social media should be taken with a grain of salt.

Specifically, Wang and his co-author Pengfei Sui of the Chinese University of Hong Kong (Shenzhen) find that investors are more likely to post on social media about their stocks the better their stocks have performed.

“Investors are basically more likely to talk about their investment successes than their failures to their friends,” explained Wang. “Their friends cannot see through this self-enhancing transmission bias, which is the tendency of investors to discuss their trades with others more after experiencing strong performance than after weak performance.”

Wang and Sui’s research also provides a note of caution to investors who look to social media for advice. Specifically, the researchers found that followers do not perform better with the stocks they purchase after seeing a social media post than they do with stock purchases that were not influenced by a post.

Based on insights from the research, Wang notes that using social media to make decisions should be done so with caution because you never know what information someone might not be sharing. 

“Think twice when you follow recommendations received through social media or, in general, through social networks,” he said. “Many people share information selectively.”