DECISION MAKING WITH SOCIAL MEDIA PLATFORMS: THE EFFECT OF PEER OPINIONS ON INVESTMENT AND PRODUCT ADOPTION

In this dissertation, I study how peer opinions from social media could help decision making for investors and consumers. In particular, I investigate two platforms that are augmented with social media functionality: an investment-based platform; and an online video gaming and distributing platform. In the first essay, I study the relationship between the opinion divergence transmitted through investment-based social media platforms and stock volatility. For each stock, investors may hold different opinions on its performance characterized by bullish, bearish, and neutral. I develop a metric that measures the opinion divergence among investors and test its power in explaining future stock volatility. I find that investors’ opinion divergence is negatively associated with future return volatility across a variety of holding periods. Moreover, the impact of opinion divergence will become attenuated over time. In the second essay, I study peer influence in video game adoption. The main challenge in the identification of peer influence is the confounding effect of homophily that introduces selection bias: People with similar characteristics and preferences are more likely to become friends. Taking advantage of the state-of-the-art recommender system algorithms, I develop a novel framework to estimate consumer tastes on products which endogenously drive tie formation and use it to control for selection. In line with previous studies, I find that ignoring the homophily will lead to a biased estimate of peer influence by 24%.

Many thanks to Yang’s dissertation committee: • Committee Chair: Chuanren Liu - Assistant Professor - Drexel University • Committee Member: Hande Benson - Associate Professor - Drexel University • Committee Member: Jade Lo - Associate Professor - Drexel University • Committee Member: Jinwook Lee - Assistant Professor - Drexel University • Committee Member: Wenjing Shen - Associate Professor - Drexel University