Social Media and Equilibrium Sentiment

33 Pages Posted: 24 Mar 2023

See all articles by Mads Nielsen

Mads Nielsen

Utrecht University - School of Economics

Date Written: March 17, 2023


Social media has become a source of data on investor opinions but communication is itself an equilibrium outcome. Platforms are driven by interactions and this paper introduces these interactions to a model of trading under asymmetric information, which yields a communication strategy that does not exist with simple messaging. In posting on social media, an informed investor optimally balances information sharing and disagreement with noise posters. Relations between equilibrium sentiment and market data can generate patterns from the empirical literature of weak positive return predictability, price continuations, and information-driven disagreement that sentiment from an equivalent equilibrium with only noise posters fails to produce.

Keywords: Information sharing, strategic communication, sentiment, asset pricing

JEL Classification: D82, D83, G12, G14

Suggested Citation

Nielsen, Mads Bibow Busborg, Social Media and Equilibrium Sentiment (March 17, 2023). Available at SSRN: or

Mads Bibow Busborg Nielsen (Contact Author)

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC

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