Recommendations of Seeking Alpha authors can affect trading activity, with the degree of influence driven by accessibility and article characteristics. Tentative evidence suggests that profitable strategies can be based on these factors.
Interested in having your article published in the Financial Analysts Journal? Submit your article here.
Abstract
The authors find that recommendations issued by Seeking Alpha authors can affect trading activity substantially, which makes them an interesting source of information for retail and professional traders alike. A recommendation’s chances to become influential in this sense are greater for more accessible articles and depend on characteristics that are observable without reading the text. This result is in line with the existence of processing costs, as Seeking Alpha community members might be unwilling to spend much effort reading full articles and instead use superficial criteria to decide which articles to follow. Article features that are consistent with a detailed, in-depth analysis provide more valuable mid- to long-term investment advice. However, the immediate reaction from readers to such articles appears to be less pronounced. The authors provide evidence for potentially profitable investment strategies based on those article features.