The Social Media Risk Premium

72 Pages Posted: 29 Jan 2020 Last revised: 9 Jun 2021

See all articles by Amin Hosseini

Amin Hosseini

George Washington University - Department of Finance

Gergana Jostova

George Washington University - Department of Finance

Alexander Philipov

George Mason University - Department of Finance

Robert Savickas

George Washington University - School of Business - Department of Finance

Date Written: January 10, 2020

Abstract

Social media has become a real part of Main Street and Wall Street. Social media risk is hard to diversify, since it is a catalyst for contagion, causing an issue to `go viral' and affect a wide cross-section of firms. We show that institutional and retail investors demand a risk premium from stocks and bonds with higher social media betas. Unlike other risk factors whose origin is hard to pin down, social media risk is linked exclusively to the age of social media and did not exist prior to the rise of today's social media giants. Social media risk carries an annual risk premium of 7.2% in stocks and 3.3% in bonds.

Keywords: Social media risk factor, cross-section of stock and bond returns, machine learning, Twitter.

JEL Classification: G11, G12, G14

Suggested Citation

Hosseini, Amin and Jostova, Gergana and Philipov, Alexander and Savickas, Robert, The Social Media Risk Premium (January 10, 2020). Available at SSRN: https://ssrn.com/abstract=3514826 or http://dx.doi.org/10.2139/ssrn.3514826

Amin Hosseini

George Washington University - Department of Finance ( email )

2023 G Street
Washington, DC 20052
United States

Gergana Jostova (Contact Author)

George Washington University - Department of Finance ( email )

2201 G St NW
Funger Hall, Suite 501
Washington, DC 20052
United States
202-994-7478 (Phone)

HOME PAGE: http://business.gwu.edu/gergana-jostova

Alexander Philipov

George Mason University - Department of Finance ( email )

Fairfax, VA 22030
United States

HOME PAGE: http://mason.gmu.edu/~aphilipo

Robert Savickas

George Washington University - School of Business - Department of Finance ( email )

Funger Hall, Suite 501R
2201 G Street, N.W.
Washington, DC 20052
United States
202-994-8936 (Phone)
202-994-5014 (Fax)

HOME PAGE: http://savickas.net/

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