Does Chatter Really Matter? Dynamics of User-Generated Content and Stock Performance

Posted: 24 Oct 2012

See all articles by Seshadri Tirunillai

Seshadri Tirunillai

University of Houston - C.T. Bauer College of Business

Gerard J. Tellis

University of Southern California - Marshall School of Business, Department of Marketing

Multiple version iconThere are 2 versions of this paper

Date Written: 2012

Abstract

This study examines whether user-generated content (UGC) is related to stock market performance, which metric of UGC has the strongest relationship, and what the dynamics of the relationship are. We aggregate UGC from multiple websites over a four-year period across 6 markets and 15 firms. We derive multiple metrics of UGC and use multivariate time-series models to assess the relationship between UGC and stock market performance.

Volume of chatter significantly leads abnormal returns by a few days (supported by Granger causality tests). Of all the metrics of UGC, volume of chatter has the strongest positive effect on abnormal returns and trading volume. The effect of negative and positive metrics of UGC on abnormal returns is asymmetric. Whereas negative UGC has a significant negative effect on abnormal returns with a short “wear-in” and long “wear-out,” positive UGC has no significant effect on these metrics. The volume of chatter and negative chatter have a significant positive effect on trading volume. Idiosyncratic risk increases significantly with negative information in UGC. Positive information does not have much influence on the risk of the firm. An increase in off-line advertising significantly increases the volume of chatter and decreases negative chatter. These results have important implications for managers and investors.

Keywords: user-generated content (UGC), stock returns, online word of mouth, vector autoregression (VAR), computational text processing

Suggested Citation

Tirunillai, Seshadri and Tellis, Gerard J., Does Chatter Really Matter? Dynamics of User-Generated Content and Stock Performance (2012). Marketing Science, Vol. 31, No. 2, 2012; pp. 198-215; DOI: 10.1287/mksc.1110.0682. Available at SSRN: https://ssrn.com/abstract=2161131

Seshadri Tirunillai (Contact Author)

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States

Gerard J. Tellis

University of Southern California - Marshall School of Business, Department of Marketing ( email )

Hoffman Hall 701
Los Angeles, CA 90089-0443
United States
213-740-5031 (Phone)
213-740-7828 (Fax)

HOME PAGE: http://gtellis.net

Register to save articles to
your library

Register

Paper statistics

Abstract Views
276
PlumX Metrics