Bounded Rationality in the Digital Age: How Salient Negative Secondhand Information on Knowledge-Sharing Platforms Triggers Investor Mis-Reactions

Digital platforms increasingly shape how retail investors encounter firm information, not only by spreading new or false content but also by resurfacing accurate information that was already public. This study examines whether such secondhand information affects investor behavior when it becomes salient and negative. In a randomized field experiment on Wikipedia, we added previously disclosed litigation news to selected public firms’ pages and compared outcomes with matched control firms and a placebo group whose pages received routine operations news. The litigation news additions increased Wikipedia pageviews, raised retail trading volume by 15.7%, and narrowed bid-ask spreads by 6.9 basis points; the placebo edits did not produce comparable effects. The effects were more evident when litigation was severe or recent, when firms were more visible or had more positive prior sentiment, and when the litigation signaled governance weakness. These findings suggest that already public negative information can still shape market behavior when platform-mediated resurfacing draws attention to it. Regulators can strengthen investor education about reshared content. Firms can monitor digital platforms for resurfaced sensitive information. Platforms can provide clearer disclosure date and novelty cues. Financial professionals can incorporate source and novelty checks before acting on attention-grabbing firm information.