Signal or Noise in Social Media Discussions: The Role of Network Cohesion in Predicting the Bitcoin Market

43 Pages Posted: 9 Jan 2017 Last revised: 30 Oct 2020

See all articles by Peng Xie

Peng Xie

Georgia Institute of Technology - Scheller College of Business

Hailiang Chen

HKU Business School, The University of Hong Kong

Yu Jeffrey Hu

Georgia Institute of Technology - Scheller College of Business

Date Written: August 2020

Abstract

Prior studies have shown that social media discussions can be helpful in predicting price movements in financial markets. With the increasingly large amount of social media data, how to effectively distinguish value-relevant information from noise remains an important question. We study this question by investigating the role of network cohesion in the relationship between social media sentiment and price changes in the Bitcoin market. As network cohesion is associated with information correlation within the discussion network, we hypothesize that less cohesive social media discussion networks are better at predicting the next-day returns than more cohesive networks. Both regression analyses and trading simulations based on data collected from Bitcointalk.org confirm our hypothesis. Our findings enrich the literature on the role of social media in financial markets and provide actionable insights for investors to trade based on social media signals.

Keywords: social media analytics, network cohesion, financial technology, Bitcoin

Suggested Citation

Xie, Peng and Chen, Hailiang and Hu, Yu Jeffrey, Signal or Noise in Social Media Discussions: The Role of Network Cohesion in Predicting the Bitcoin Market (August 2020). Journal of Management Information Systems, forthcoming, Available at SSRN: https://ssrn.com/abstract=2894089 or http://dx.doi.org/10.2139/ssrn.2894089

Peng Xie

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
4043696131 (Phone)

Hailiang Chen (Contact Author)

HKU Business School, The University of Hong Kong ( email )

K. K. Leung Building
University of Hong Kong
Hong Kong

HOME PAGE: http://www.fbe.hku.hk/people/academic/hailiang-chen

Yu Jeffrey Hu

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

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