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

See all articles by Bastian Breitmayer

Bastian Breitmayer

Leuphana University of Lueneburg

Filippo Massari

Bocconi University - Department of Decision Sciences; University of East Anglia

Matthias Pelster

Paderborn University

Date Written: June 21, 2017

Abstract

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

Breitmayer, Bastian and Massari, Filippo and Pelster, Matthias, Swarm Intelligence? Stock Opinions of the Crowd and Stock Returns (June 21, 2017). International Review of Economics and Finance 64, November 2019, 443-464. , Available at SSRN: https://ssrn.com/abstract=2787744 or http://dx.doi.org/10.2139/ssrn.2787744

Bastian Breitmayer

Leuphana University of Lueneburg ( email )

Scharnhorststra├če 1
Wilschenbrucher Weg 69
L├╝neburg, 21335
Germany

Filippo Massari

Bocconi University - Department of Decision Sciences ( email )

Via Roentgen 1
Milan, 20136
Italy

University of East Anglia ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

Matthias Pelster (Contact Author)

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

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