Echo Chambers​

Posted: 8 Jun 2020 | Last revised: 14 Feb 2023

J. Anthony Cookson
University of Colorado at Boulder – Leeds School of Business

Joseph Engelberg
University of California, San Diego (UCSD) – Rady School of Management

William Mullins
University of California, San Diego (UCSD)

Abstract

We find evidence of selective exposure to confirmatory information among 400,000 users on the investor social network StockTwits. Self-described bulls are 5 times more likely to follow a user with a bullish view of the same stock than self-described bears. Consequently, bulls see 62 more bullish messages and 24 fewer bearish messages than bears over the same 50-day period. These “echo chambers” exist even among professional investors and are strongest for investors who trade on their beliefs. Finally, beliefs formed in echo chambers are associated with lower ex-post returns, more siloing of information and more trading volume.

 

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