The role of online freelance stock analysts in correcting overly pessimistic market sentiment

Myungsun Kim, Robert Kim, Onook Oh, H Raghav Rao
Managerial Finance,Vol. 44, Issue 8, Pages: 954-971.
Purpose The purpose of this paper is to examine the role of online freelance stock analysts in correcting mispricing of hard-to-value firms during sentiment-driven market periods. Design/methodology/approach The sample covers 23,758 Seeking Alpha articles obtained for the period between January 2005 and September 2011. The authors use OLS regressions to test the stock market reaction around Seeking Alpha analysts’ reports. The information in online analysts’ reports is measured by the tone of stock articles posted in (SA). Findings The analysis reveals that the degree of negative tone of their stock articles is related to three-day stock returns around the article posting dates. It further reveals that the relation between these returns and prevailing market sentiment depends on firm-specific susceptibility to the market sentiment. The three-day stock returns are higher during low market