Can Facebook Predict Stock Market Activity?

58 Pages Posted: 20 Mar 2012 Last revised: 24 Nov 2016

See all articles by Yigitcan Karabulut

Yigitcan Karabulut

Frankfurt School of Finance & Management; CEPR

Multiple version iconThere are 2 versions of this paper

Date Written: October 21, 2013

Abstract

Using a novel and direct measure of investor sentiment, I find that Facebook's Gross National Happiness (GNH) has the ability to predict changes in both daily returns and trading volume in the US stock market. For instance, an increase of one standard deviation in GNH is associated with an increase of 11.23 basis points in market returns over the next day. Consistent with noise trader models, the influence of GNH on market returns is temporary and is reversed during the following trading weeks. I also verify the empirical validity of GNH by performing several tests in different natural settings.

Keywords: Investor sentiment, social media, behavioral nance, Facebook, social networks

JEL Classification: D81, G11, G12

Suggested Citation

Karabulut, Yigitcan, Can Facebook Predict Stock Market Activity? (October 21, 2013). AFA 2013 San Diego Meetings Paper. Available at SSRN: https://ssrn.com/abstract=2017099 or http://dx.doi.org/10.2139/ssrn.2017099

Yigitcan Karabulut (Contact Author)

Frankfurt School of Finance & Management ( email )

Sonnemannstra├če 9-11
Frankfurt am Main, 60314
Germany

CEPR ( email )

London
United Kingdom

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