Social interaction and stock price crash risk: a social network analysis approach

Using a social network analysis (SNA) approach to construct a retail investor interaction network, this paper examines whether investor social interactions increase stock price crash risk. The results show that social interactions on social media increase the likelihood of a stock price crash, suggesting that such interactions among retail investors breed irrational emotions that spread throughout the network, leading to increased risk in the stock market. We also find that this relation is more pronounced in bear markets.