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Network effect and investor’s perceptions: An empirical investigation

Abstract
Investors’ perceptions, and their understanding related to an investment, are paramount to decision-making in economic and investment settings. Social media is increasingly playing a vital role in influencing investors’ perceptions and investors’ decisions in the financial arena. Social media is a comfortable and easy tool to use. That’s why it has just become a fundamental part of online news sharing and information distribution. In the first study of this thesis, a network structure is constructed and built social ties circle based on the frequency of communication of investors within the network, and the network size of the investors to develop a comprehensive measurement scale for the social network index. Our findings indicate that the acquisition of information in the social network of investors depends on different components or factors. A significant factor in the network index is the network degree (network connectivity). It implies that network members with higher degrees or connections acquire vast amounts of information. Likewise, investors with larger networks receive enormous amounts of information, notably "following," which is the principal component in terms of network size. As a result, network size appears as the network index's second biggest factor. The smaller contribution comes from social tie circles. However, collectively, all these factors represent the social network index. In the second study, we argue that the impact of financial information and news on investors’ perceptions is moderated by network factors such as network structure, social ties, and network size of the network. The impact of information on an individual’s perception is also called a social network or network effect. To tackle the moderating role of these network factors, we employed PLS-SEM as a statistical technique. The findings of this study indicate that network connectivity and social ties are crucial for the acquisition of information within the network. The findings of the study also show that network connectivity and social ties circle plays a central role in determining the impact of financial information. Our study further indicates that the impact of financial information and news on investors’ perceptions depends on their theme. In the third essay of this thesis, we investigate how investors’ perceptions and preferences in terms of trading are influenced by their cultural background and network factors. In this study, we considered the moderating role of network factors in a cross-cultural context. The main subjects of our research datasets are investors who buy and sell shares and/or stocks of companies listed on the stock exchanges of New Zealand and South Korea. In this study, we examined data from 214 retail investors from the New Zealand Stock Exchange (NZX) and South Korea. In comparison to non-kiwi investors, the study's findings show that network factors have a major impact on how information is disseminated among Kiwi investors. The results of this study also demonstrate that network factors' effects differ across cultures and countries. To conclude, Twitter is a major social media platform that helps investors to connect with their counterparts and obtain financial information through back-and-forth interactions. However, access to information on social networks depends on network structure (network connectivity), social ties circle (family, friends, and colleagues), and network size (number of contact or followers and followings). Twitter also enables prompt dissemination of financial news and information, which can substantially impact investors’ perceptions. However, the impact of information on investors’ perceptions varied cross-culture because of varied network factors.
Type
Thesis
Type of thesis
Series
Citation
Date
2023
Publisher
The University of Waikato
Rights
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