The Social Signal

Journal of Financial Economics, volume 158, 2024 [10.1016/j.jfineco.2024.103870]

73 Pages Posted: 21 Oct 2022 Last revised: 7 Sep 2024

See all articles by J. Anthony Cookson

J. Anthony Cookson

University of Colorado at Boulder - Leeds School of Business

Runjing Lu

University of Toronto

William Mullins

University of California, San Diego (UCSD)

Marina Niessner

Indiana University - Kelley School of Business - Department of Finance

Date Written: December 15, 2023

Abstract

We examine social media attention and sentiment from three major platforms: Twitter, StockTwits, and Seeking Alpha. We find that, even after controlling for firm disclosures and news, attention is highly correlated across platforms, but sentiment is not: its first principal component explains little more variation than purely idiosyncratic sentiment. Using market events, we attribute differences across platforms to differences in users (e.g., professionals vs. novices) and differences in platform design (e.g., character limits in posts). We also find that sentiment and attention contain different return-relevant information. Sentiment predicts positive next-day returns, but attention predicts negative next-day returns. These results highlight the importance of distinguishing between social media sentiment and attention across different investor social media platforms. In the burgeoning social finance literature, nearly all papers examine single platforms; our paper cautions that attention-related results from these papers are more likely to generalize than results concerning sentiment.

Keywords: Social media, Retail trading, Social finance

JEL Classification: G14, G41, G12

Suggested Citation

Cookson, J. Anthony and Lu, Runjing and Mullins, William and Niessner, Marina, The Social Signal (December 15, 2023). Journal of Financial Economics, volume 158, 2024 [10.1016/j.jfineco.2024.103870], Available at SSRN: https://ssrn.com/abstract=4241505 or http://dx.doi.org/10.1016/j.jfineco.2024.103870

J. Anthony Cookson (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Runjing Lu

University of Toronto ( email )

105 St George Street
Toronto, Ontario M5S 3G8
Canada

William Mullins

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

Marina Niessner

Indiana University - Kelley School of Business - Department of Finance

1309 E. 10th St
Bloomington, IN 47405
United States

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