Swarm Intelligence? Stock Opinions of the Crowd and Stock Returns
International Review of Economics and Finance 64, November 2019, 443-464.
48 Pages Posted: 1 Jun 2016 Last revised: 13 Nov 2019
Date Written: June 21, 2017
We find that crowds' analyses of stocks, disclosed on a social trading platform, provide explanatory power for stock returns. Exploiting a novel dataset that contains more than 14.9 million individual stock assessments for 10,452 stocks over the period from August 1, 2007, to July 15, 2015, our study shows that social trading platforms add valuable information for explaining future and abnormal stock returns. We find that a portfolio based on social media opinions yields a monthly excess return of 3.3%. We provide a theoretical rationale for our findings based on the argument that the platform is subject to fewer institutional restrictions and is designed more efficiently for prediction than financial markets.
Keywords: social trading, crowd intelligence, stock returns, abnormal returns
JEL Classification: D14, G11, G23
Suggested Citation: Suggested Citation