From WallStreetBets To C-Suite: Essays On Attention, Emotion, And Incentives In Modern Financial Markets

Abstract

This dissertation consists of three empirical finance essays on two key group of actors in the stock market – retail investors and CEOs. The information explosion era that we live in creates a deluge of data spanning the textual, audio and visual space beyond structured panel data’s cold, hard numbers. With the help from concurrent technological advancements and ever-growing computing powers to analyze this sea of data, this dissertation documents my attempt to dig further into questions posed by the forerunners in the finance research field. In the three essays, I parse through and analyze unstructured textual, audio, and visual data to gain insight into the age-old debates on attention, emotion, and incentives. The first essay examines the discussion and attention in online stock forum r/WallStreetBets, and documents outperformance of the consensus bullish portfolio. The second essay examines the impact of TV interviews of CEOs and documents that CEOs’ positive emotions have positive market impact when the company misses earnings; when news is good, the interview generates only short term alpha on the company stock for a brief period. The third essay uses agency theory to show that managers are motivated to maintain the same level of hedge intensity even if they are provided with stock option incentives.