The Role of Opinion Leaders in Crowd Wisdom: An Information Cascade Perspective

Specialized investment platforms significantly influence financial service operations by enhancing collective intelligence and uncovering trading opportunities. However, the large volume of data, particularly the prevalence of noise, hinders effective decision-making. Opinion leaders constitute a distinct and influential group of users on these platforms, and the question of whether their presence can help financial institutions make better decisions remains open. To address this key operational question, we focus on two indicators in investment platforms: investor disagreement and prediction accuracy. Our findings reveal that the presence of opinion leaders leads to reduced investor disagreement and increased accuracy in predicting future stock returns. This effect is more pronounced when opinion leaders participate earlier in a discussion or contribute posts that are more innovative, longer, or express vivid opinions. Our subsequent experiment further reveals the psychological and cognitive mechanisms behind these findings: the presence of opinion leaders enhances investors’ cognitive abilities by providing them with more information and boosts their confidence in the information they acquire. These results contribute to information cascade theory by demonstrating how varied communication patterns result in different qualities of crowd decision-making. Additionally, we contribute to the operations management literature by highlighting the crucial role of opinion leaders in enhancing both financial services and social media operations. We suggest that financial institutions develop trading strategies based on opinion leaders’ posts and that platforms tailor features to leverage opinion leaders’ participation.