Social Media Analysts' Skills: Insights from Text-implied Beliefs

79 Pages Posted: 29 Mar 2021 Last revised: 19 Dec 2023

See all articles by Chukwuma Dim

Chukwuma Dim

George Washington University

Date Written: December 17, 2020


This paper analyzes the extent to which nonprofessional social media investment analysts (SMAs) form correct beliefs about stock returns. Contrary to the wisdom-of-the-crowd hypothesis, over half of the SMAs form beliefs that correctly align with future returns. However, there is substantial heterogeneity in the SMAs' ability: some 13% high-skilled SMAs produce a one-week three-factor alpha of 61 bps, while the remaining 87% generate only 6 bps. Firm and industry specializations are the distinctive traits of the high-skilled SMAs. Although SMAs extrapolate and herd, their expectations are not systematically wrong. Consistent with theory, the extrapolation and herding intensities depend on SMAs' skills.

Keywords: Nonprofessional analysts, Expectation formation, Social networks, Social finance, Machine learning, Textual analysis

JEL Classification: G11, G12, G14

Suggested Citation

Dim, Chukwuma, Social Media Analysts' Skills: Insights from Text-implied Beliefs (December 17, 2020). Available at SSRN: or

Chukwuma Dim (Contact Author)

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

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