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Customers as Advisors: The Role of Social Media in Financial MarketsHailiang ChenCity University of Hong Kong - Department of Information Systems Prabuddha DePurdue University - Krannert School of Management Yu Jeffrey HuPurdue University - Krannert School of Management Byoung-Hyoun HwangPurdue University - Krannert School of Management January 17, 2013 Abstract: Social media has become a popular venue for individuals to share the results of their own financial analysis on stocks and other financial securities. This paper investigates the extent to which investor opinions transmitted through social media predict financial-market outcome variables. We conduct textual analysis of articles published on one of the most popular social-media platforms for investors in the United States; we also consider the readers’ perspective as inferred via commentaries written in response to these articles. We find that the views expressed in articles and commentaries each substantially contribute in predicting future stock returns and earnings surprises. The predictability strengthens with the number of commentaries over which readers’ aggregate views are measured. Together, these findings point to the usefulness of investor-turned-advisor opinions in financial markets.
Number of Pages in PDF File: 37 Keywords: Investor-turned-advisors, Social Media, Financial markets JEL Classification: G11, G12, G14 working papers seriesDate posted: April 12, 2011 ; Last revised: January 17, 2013Suggested CitationContact Information
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