Negativity Bias, Social Media, and Analyst Behavior

57 Pages Posted: 16 Feb 2022 Last revised: 31 Mar 2024

See all articles by Ann Marie Hibbert

Ann Marie Hibbert

West Virginia University - John Chambers College of Business and Economics, Department of Finance

Qiang Kang

Florida International University (FIU) - Department of Finance

Alok Kumar

University of Miami - Miami Herbert Business School

Suchi Mishra

Florida International University (FIU) - Department of Finance

Date Written: March 28, 2024

Abstract

We examine whether sell-side equity analysts exhibit negativity bias and process social media information asymmetrically. We find that sell-side equity analysts are more responsive to negative firm-specific tweets and use this information to improve their earnings forecasts. Analysts who cover firms with greater sensitivity to negative Twitter information, issue relatively less optimistic and more accurate earnings forecasts, especially for opaque firms. Using an exogenous event that changed the information content of individual tweets and a difference-in-differences design, we establish a causal link between Twitter information and analyst forecasts. Collectively, these findings indicate that financial markets process negative information more efficiently.

Keywords: Social media, Twitter sentiment, earnings forecasts, sell-side analysts, firm-specific information.

JEL Classification: G14, G24.

Suggested Citation

Hibbert, Ann Marie and Kang, Qiang and Kumar, Alok and Mishra, Suchismita, Negativity Bias, Social Media, and Analyst Behavior (March 28, 2024). Available at SSRN: https://ssrn.com/abstract=4035960 or http://dx.doi.org/10.2139/ssrn.4035960

Ann Marie Hibbert

West Virginia University - John Chambers College of Business and Economics, Department of Finance ( email )

Morgantown, WV 26506
United States

Qiang Kang

Florida International University (FIU) - Department of Finance ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Alok Kumar (Contact Author)

University of Miami - Miami Herbert Business School ( email )

517B Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://sites.google.com/view/alokmiami/home

Suchismita Mishra

Florida International University (FIU) - Department of Finance ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

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