How are Social and Mass Media Different in Relation to the Stock Market? A Study on Topic Coverage and Predictive Value

Dong, Hang, Jie Ren, Balaji Padmanabhan, and Jeffrey V. Nickerson. "How are Social and Mass Media Different in Relation to the Stock Market? A Study on Topic Coverage and Predictive Value." Information & Management (2021): 103588.

45 Pages Posted: 12 Aug 2019 Last revised: 4 Jan 2022

See all articles by Hang Dong

Hang Dong

IE University

Jie Ren

Fordham University

Balaji Padmanabhan

University of South Florida - College of Business Administration

Jeffrey V. Nickerson

Stevens Institute of Technology - School of Business

Date Written: December 26, 2021

Abstract

Although investors in financial markets have access to information from both mass media and social media, trading platforms that curate and provide this information have little to go by in terms of understanding the difference between these two types of media. This paper compares social media with mass media in the stock market, focusing on information coverage diversity and predictive value with respect to future stock absolute returns. Based on a study of nearly a million stock-related news articles from the Sina Finance news platform and 12.7 million stock-related social media messages from the popular Weibo platform in China, we find that social media covers less stocks than mass media, and this effect is amplified as the volume of media information increases. We find that there is some short-term predictive value from these sources, but they are different. Although mass media information coverage is more predictive than social media information coverage in a one-day horizon, it is the other way around in a two-to five-day horizon. These empirical results suggest that social media and mass media serve stock market investors differently. We draw connections to theories related to how crowds and experts differ and offer practical implications for the design of media-related IS systems.

Keywords: social media, mass media, information coverage diversity, predictive value, future stock return

Suggested Citation

Dong, Hang and Ren, Jie and Padmanabhan, Balaji and Nickerson, Jeffrey V., How are Social and Mass Media Different in Relation to the Stock Market? A Study on Topic Coverage and Predictive Value (December 26, 2021). Dong, Hang, Jie Ren, Balaji Padmanabhan, and Jeffrey V. Nickerson. "How are Social and Mass Media Different in Relation to the Stock Market? A Study on Topic Coverage and Predictive Value." Information & Management (2021): 103588., Available at SSRN: https://ssrn.com/abstract=3434161 or http://dx.doi.org/10.2139/ssrn.3434161

Hang Dong

IE University ( email )

Castellón de la Plana 8
Madrid, 28006
Spain

Jie Ren (Contact Author)

Fordham University ( email )

Rose Hill Campus Bronx
New York, NY 10458
United States

Balaji Padmanabhan

University of South Florida - College of Business Administration ( email )

4202 E. Fowler Avenue, BSN 3403
Tampa, FL 33620-5500
United States

Jeffrey V. Nickerson

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

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