15 Pages Posted: 9 Jan 2016 Last revised: 21 Feb 2016
Date Written: January 6, 2016
In this work, we document that the characteristics of securities derived from social media have significant power in explaining the time-series variation in daily stock returns. We examine the recent period from January 4, 2012 to October 30, 2015 in conjunction with direct tweet sentiments as provided by StockTwits. Notably, our “Social Media company-specific” factor is very different from prior “macro” factors. The Social Media Factor consists of views generated directly from the crowd on specific securities. Some have argued that this exposure to tweet sentiments is just noise and should not merit any compensation over time, reducing this factor to irrelevance. We disagree. Moreover, we document that the Social Media Factor, the “sixth” factor, is distinct from the traditional five factors authored by Fama and French (1992, 1993, and 1994).
Keywords: Social Media Factor, tweet sentiment, Fama-French Factors, social media data, tweets
Suggested Citation: Suggested Citation
Liew, Jim Kyung-Soo and Budavári, Tamás, The 'Sixth' Factor -- Social Media Factor Derived Directly from Tweet Sentiments (January 6, 2016). Available at SSRN: https://ssrn.com/abstract=2711825 or http://dx.doi.org/10.2139/ssrn.2711825