Thoughts on the Influence of Social Media on Investor Behavior under the Concept of Behavioral Finance

Abstract

At present, most investors' sources for learning and discussing investment issues have been social media platforms. Behavioral finance considers the impact of social media on behaviour, and thus, when presenting data, one cannot ignore the spread of emotions, herd behaviour, attention biases and contagion effects. Social media's effects on investor behaviour in light of behavioural finance are presented here. Four channels through which social media influences investors have been identified in the analysis: the dissemination of information, the transmission of sentiment, social proof and attention concentration. Recent research has shown that attention on social media can lead to risk-taking behaviour, herd behaviour, short-termism and noisy trading; at the same time, information is also disseminated. In short, a large number of news and other information are available on social media for investors, but some investors are more prone to bias.