Can Twitter Help Predict Firm-Level Earnings and Stock Returns?

66 Pages Posted: 14 Sep 2016 Last revised: 19 Jul 2017

See all articles by Eli Bartov

Eli Bartov

NYU Stern School of Business

Lucile Faurel

Arizona State University

Partha S. Mohanram

University of Toronto - Rotman School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: July 18, 2017

Abstract

Prior research has examined how companies exploit Twitter in communicating with investors, and whether Twitter activity predicts the stock market as a whole. We test whether opinions of individuals tweeted just prior to a firm’s earnings announcement predict its earnings and announcement returns. Using a broad sample from 2009 to 2012, we find that the aggregate opinion from individual tweets successfully predicts a firm’s forthcoming quarterly earnings and announcement returns. These results hold for tweets that convey original information, as well as tweets that disseminate existing information, and are stronger for tweets providing information directly related to firm fundamentals and stock trading. Importantly, our results hold even after controlling for concurrent information or opinion from traditional media sources, and are stronger for firms in weaker information environments. Our findings highlight the importance of considering the aggregate opinion from individual tweets when assessing a stock’s future prospects and value.

Keywords: Twitter, social media, Wisdom of Crowds, earnings, analyst earnings forecast, abnormal stock returns.

Suggested Citation

Bartov, Eli and Faurel, Lucile and Mohanram, Partha S., Can Twitter Help Predict Firm-Level Earnings and Stock Returns? (July 18, 2017). Rotman School of Management Working Paper No. 2631421. Available at SSRN: https://ssrn.com/abstract=2782236 or http://dx.doi.org/10.2139/ssrn.2782236

Eli Bartov

NYU Stern School of Business ( email )

44 W. 4th Street, Suite 10-96
New York, NY 10012
United States
212.998.0016 (Phone)

Lucile Faurel (Contact Author)

Arizona State University ( email )

W.P. Carey School of Business
School of Accountancy, B267H
Tempe, AZ 85287
United States
(480) 965-6216 (Phone)

Partha S. Mohanram

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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