Wisdom of Crowds: The Value of Stock Opinions Transmitted Through Social Media

Review of Financial Studies (RFS), Forthcoming

52 Pages Posted: 12 Apr 2011 Last revised: 4 Oct 2016

Hailiang Chen

City University of Hong Kong - Department of Information Systems

Prabuddha De

Purdue University - Krannert School of Management

Yu Jeffrey Hu

Georgia Institute of Technology - Scheller College of Business

Byoung-Hyoun Hwang

Cornell University - Dyson School of Applied Economics and Management; Korea University - Department of Finance

Date Written: December 8, 2013

Abstract

Social media has become a popular venue for individuals to share the results of their own analysis on financial securities. This paper investigates the extent to which investor opinions transmitted through social media predict future stock returns and earnings surprises. 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 both articles and commentaries predict future stock returns and earnings surprises.

Keywords: Investor-turned-advisors, Social media, Financial markets

JEL Classification: G11, G12, G14

Suggested Citation

Chen, Hailiang and De, Prabuddha and Hu, Yu Jeffrey and Hwang, Byoung-Hyoun, Wisdom of Crowds: The Value of Stock Opinions Transmitted Through Social Media (December 8, 2013). Review of Financial Studies (RFS), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1807265 or http://dx.doi.org/10.2139/ssrn.1807265

Hailiang Chen (Contact Author)

City University of Hong Kong - Department of Information Systems ( email )

Kowloon Tong
Hong Kong

HOME PAGE: http://www.cb.cityu.edu.hk/staff/hailchen/

Prabuddha De

Purdue University - Krannert School of Management ( email )

403 West State Street
West Lafayette, IN 47907-2056
United States
765-494-0699 (Phone)

HOME PAGE: http://www.krannert.purdue.edu/directory/bio.asp?username=pde

Yu Jeffrey Hu

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Byoung-Hyoun Hwang

Cornell University - Dyson School of Applied Economics and Management ( email )

Ithaca, NY
United States

HOME PAGE: http://www.bhwang.com

Korea University - Department of Finance

Seoul, 136-701
United States

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