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19 N.Y.U. J.L. & Bus. 489 (2022-2023)
The Rise of the Finfluencer

handle is hein.journals/nyujolbu19 and id is 507 raw text is: NEW YORK UNIVERSITY JOURNAL OF LAW & BUSINESS VOLUME 19 SUMMER 2023 NUMBER 3 THE RISE OF THE FINFLUENCER SUE S. GUAN* In today's meme-riddled stock market, how viable do traditional theories of information exchange and price discovery remain? The conventional under- standing of stock market price discovery focuses on the exchange of informa- tion, typically tied to the present value of an issuer's future cash flows, between traders. This paper explores the impact of finfluencers -those who wield outsize influence on investing decisions through social media-on this understanding. Finfluencers increasingly broker stock market information. Social media makes doing so easier than ever before. This paper explores two implications of the rise offinfluencers. First, finfluencers are not solely motivated to seek out fundamental value information and trade to profit off of it. Instead, they try to maximize popularity, be entertaining, and grow their brand, among other motivations. Because they mediate the information that reaches retail investors and provide powerful coordination mechanisms across those investors, finfluencers' influence shapes the types of information and moti- vations that are reflected in stock price movements. Second, the more influ- ence finfluencers wield, the more they can predict and even control trading patterns among their followers. From a finfluencer's perspective, stock price movements can become more predictable, which can weaken finfluencers' in- centives to provide valuable information to their followers and make profit- ing at the expense of their followers more tempting. * Albert J. Ruffo Assistant Professor of Law, Santa Clara University School of Law. For comments and helpful discussions, I am grateful to Afra Afsharipour, David Ball, Tom Brower, Steve Diamond, Lisa Fairfax, Jill Fisch, Merritt Fox, Larry Glosten, Eric Goldman, Deep Gulasekaram, Brad Joon- deph, Don Langevoort, Amelia Miazad, Geeyoung Min, William Moon, Tyler Ochoa, Menesh Patel, Don Polden, Cathy Sandoval, David Sloss, and David Yosifon. I am also grateful for helpful comments from the participants at the Institute for Law & Economics (ILE) Junior Faculty Business and Financial Law Workshop, the 2nd Annual Workshop for AAPI and MENA Women in the Legal Academy, and faculty workshops at Santa Clara University School of Law and UC Davis School of Law. 489 Imaged with Permission of N.Y.U. Journal of Law & Business

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