The Effects Of Social Interaction On Stock Market

The analysis and forecasting of stock market has always been a hot issue. Investors’ behaviors directly decide the changes of stock market, over the past ten years, more and more papers used the theories and methods of psychology and sociology to analyze investors’ transaction behaviors, and furtherly analyze their impacts on stock market. As we all know, stock investment is a complicated decision, but most investors lack relative knowledge and self-confidence, and they will or they must depend on the interactions with others to help themselves make decisions. Moreover, with the rapid development of internet, blog, microblog and some BSS have become the important platforms for them to take interactions. Thus, such social interactions will have an influence on investors’ judgments of information and their final investing behaviors. From the perspective of sociology, this paper selects the most popular financial blog, sina financial blog as the sample to research the social interactions’impact on stock market.We define social interactions as the process of information exchange and feelings communication for individuals and groups, and this process will have influence on each interaction body. Blog has three interaction relationships, the first is the interaction among blog authors, the second is the direct interaction between blog authors and investors, and the third is the interaction among different investors, which is also the indirect interaction between blog authors and investors. The second interaction will directly affect stock market, and will also through the third interaction affect it with more scope. As a whole, blog this social interaction model affects stock market through a divergent net structure. And this paper mainly analyzes the above second interaction relationship.And we describe this interaction from different aspects and construct corresponding variables. On one hand, from the blog author perspective, we use blog number representing authors’ demands for interaction, and use the ratio of popular authors representing authors’ influence. On the other hand, from the investors perspective, we use blog reading number indicating interaction’s coverage, and use blog fondness number indicating interaction’s level. What’s more, because interactions are based on information, and the information for blog are blog’s signal or say emotion, we include this information into the interaction variables by construct blog emotion index. All these above variables are collected by text mining and text categorization from blog website.To empirically study the four interaction variables’ impacts on the market index return, volatility and trading volume, we build GJR-GARCH-M(1,1) time series model. And we also build VAR model to research their dynamics relationship. Our results show that blog authors demand for interaction, interaction coverage and interaction level not only have remarkable positive correlation with index return and trading volume, but also predict them in short-term period. Interaction’s impact on index return is larger with high index sample than that with low index sample. And compared with HS300Index and Shanghai Stock Index, Growth Enterprise Index is affected in larger size by interactions. At the same time, index return has reverse correction impact on interactions, with the increase of return, the interaction between blog authors and investors will weaken in some degree. As a whole, the blog interaction’s effect to stock market is benignant.This paper holds the view that we should recognize more comprehensively the important effect of internet-based social interactions on financial market. To perfect the financial market, we shouldn’t just focus on the economic aspects. In the future, how to normalize internet-based interaction platform, how to lead investors rationally participate in social interactions, and how to build social interaction atmosphere which is harmonious and benefit to national economy development and reform, all of these must be taken into consideration for the construction of a more effective capital market.