Does It Pay to Follow Investment Advice on YouTube?

Abstract

I examine the skill of non-professional analysts (NPAs) that make stock recommendations on Youtube.com, the largest global video-sharing platform. By extracting text from video and identifying top influencers' buy and sell recommendations on the platform, I find some evidence of investment value. On average, NPAs generate large, but insignificant positive abnormal returns. However, there is significant dispersion. Upon further analysis, I find that 70% of influencers indeed generate Alpha. Exploiting this dispersion, I construct two hedge portfolios that consistently generate positive abnormal returns over the full sample period. Overall, despite regulators concerns over non-professionals providing investment advice, my results suggest this fear is unfounded.

Keywords: Youtube, Retail investors, Non-professional Analyst, FinTech, Social Media, NLP

JEL Classification: G20, G23