Social Media Analysts and Sell-Side Analyst Research

Posted: 10 Sep 2021

See all articles by Michael S. Drake

Michael S. Drake

Brigham Young University - Marriott School

James Moon

Georgia Institute of Technology - Scheller College of Business

Brady J. Twedt

University of Oregon - Lundquist College of Business

James Warren

University of Arkansas

Multiple version iconThere are 2 versions of this paper

Date Written: September 6, 2021

Abstract

We examine how research posted by “social media analysts” (SMAs)—individuals posting equity research online via social media investment platforms—is related to research subsequently produced by professional sell-side equity analysts. Using data from Seeking Alpha, we find that the market reaction to sell-side analyst research is substantially reduced when the analyst research is preceded by the report of an SMA, and that this is particularly true of sell-side analysts’ earnings forecasts. We further find that this effect is more pronounced when SMA reports contain more decision-useful language, are produced by SMAs with greater expertise, and relate to firms with greater retail investor ownership. We also provide evidence that the attenuated response to sell-side research is most likely explained by SMA research preempting information in sell-side research and that analysts respond to SMA preemption with bolder and more disaggregated forecasts. Collectively, our results suggest that equity research posted online by SMAs provides investors with information that is similar to but arrives earlier than sell-side equity research, and speak to the connected and evolving roles of information intermediaries in capital markets.

Keywords: Social media analyst; sell-side analyst; information intermediaries; equity research

JEL Classification: G14; M41

Suggested Citation

Drake, Michael S. and Moon, James and Twedt, Brady J. and Warren, James, Social Media Analysts and Sell-Side Analyst Research (September 6, 2021). Review of Accounting Studies, Forthcoming, Georgia Tech Scheller College of Business Research Paper No. 3918541, Available at SSRN: https://ssrn.com/abstract=3918541

Michael S. Drake

Brigham Young University - Marriott School ( email )

United States

James Moon

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

800 West Peachtree St.
Atlanta, GA 30308
United States

Brady J. Twedt (Contact Author)

University of Oregon - Lundquist College of Business ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

James Warren

University of Arkansas ( email )

220 N McIlroy Ave
Fayetteville, AR 72701
United States

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