Big Data Analysis of Volatility Spillovers of Brands across Social Media and Stock Market Performance

54 Pages Posted: 2 Oct 2016 Last revised: 9 Jan 2019

See all articles by Myrthe Dieijen

Myrthe Dieijen

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Abhishek Borah

INSEAD

Gerard J. Tellis

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

Philip Hans Franses

Erasmus University Rotterdam (EUR) - Department of Econometrics

Date Written: September 30, 2016

Abstract

Volatility is an important metric of financial performance, indicating uncertainty or risk. So, predicting and managing volatility is of interest to both company managers and investors. This study investigates whether volatility in user-generated content (UGC) can spill over to volatility in stock returns and vice versa. Sources for user-generated content include tweets, blog posts, and Google searches. The authors test the presence of these spillover effects by a multivariate GARCH model. Further, the authors use multivariate regressions to reveal which type of company-related events increase volatility in user-generated content.
Results for two studies in different markets show significant volatility spillovers between the growth rates of user-generated content and stock returns. Further, specific marketing events drive the volatility in user-generated content. In particular, new product launches significantly increase the volatility in the growth rates of user-generated content, which in turn can spill over to volatility in stock returns. Moreover, the spillover effects differ in sign depending on the valence of the user-generated content in Twitter. The authors discuss the managerial implications.

Keywords: user-generated content, stock market performance, volatility, multivariate GARCH model, spillover effects, natural language processing.

Suggested Citation

Dieijen, Myrthe and Borah, Abhishek and Tellis, Gerard J. and Franses, Philip Hans, Big Data Analysis of Volatility Spillovers of Brands across Social Media and Stock Market Performance (September 30, 2016). ERIM Report Series . Available at SSRN: https://ssrn.com/abstract=2846339

Myrthe Dieijen (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31104088945 (Phone)

Abhishek Borah

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

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

Philip Hans Franses

Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1278 (Phone)
+31 10 408 9162 (Fax)

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