How Social Network Impacts Stock Market Crash

In recent years,the turmoil of the capital market has intensified and the phenomenon of stock market crashes has occurred frequently,which has triggered extensive discussions on the conditions leading to stock market crashes.However,the existing research mainly focuses on the role of corporate governance,policy system and individual decision-making bias,and lacks systematic research on the impact of collective irrational behavior on the stock market.Therefore,this paper focuses on how individual irrational behavior can be transformed into collective irrational behavior through social networks during the whole process of stock market crash,and what role this transformation plays in stock market crash.In this paper,theoretical simulation and empirical test are used to test the impact of social network on stock market crash.The results show that social network interaction can infect investors' irrational emotions and therefore increase the risk of stock market crash.This paper constructs artificial stock market based on the simulation model of cellular automata,and tests the dynamic impact of the interaction between rational investors and irrational investors on stock price by simulating the behavior and interaction of investors.The simulation results show that under the condition of heterogeneous investor interaction,stock price bubbles and stock price collapse appear in different degrees.When the interaction scope of social networks,the crowd psychology of irrational traders and the proportion of retail investors are bigger,the stock price bubbles and collapse are all more intense.The arbitrage structure of rational investors can not eliminate the boosting effect of irrational traders on stock price deviation.When positive or negative signals are released in the market,irrational emotions such as over-optimism or over-pessimism will spread from individual to collective more quickly.This paper also uses text mining technology to empirically test the impact of investors' posting sentiment and interaction on the risk of stock market crash in Eastmoney forum.The empirical results show that the over-optimistic emotion in the stock forum will increase the risk of stock market crash,and the interaction of investors will make irrational mood contagious among different investors,making individual irrational mood gradually transform into collective irrational mood,and then trigger the stock market crash.The government can reduce the infective effect of social network interaction on irrational emotions by reducing the degree of investor conformity,increasing the proportion of institutional investors and improving information disclosure,so that social networks can play a positive role in sharing information and improving information asymmetry.