Finfluencers

57 Pages Posted: 3 May 2023 Last revised: 18 Jul 2023

See all articles by Ali Kakhbod

Ali Kakhbod

University of California, Berkeley

Seyed Mohammad Kazempour

Louisiana State University

Dmitry Livdan

University of California, Berkeley

Norman Schuerhoff

Swiss Finance Institute - HEC Lausanne

Date Written: July 5, 2023

Abstract

Tweet-level data from a social media platform reveals low average accuracy and high dispersion in the quality of advice by financial influencers, or “finfluencers”: 28% of finfluencers are skilled, generating 2.6% monthly abnormal returns, 16% are unskilled, and 56% have negative skill (“antiskill”) generating -2.3% monthly abnormal returns. Consistent with homophily shaping finfluencers’ social networks, antiskilled finfluencers have more followers and more influence on retail trading than skilled finfluencers. The advice by antiskilled finfluencers creates overly optimistic beliefs most times and persistent swings in followers’ beliefs. Consequently, finfluencers cause excessive trading and inefficient prices such that a contrarian strategy yields 1.2% monthly out-of-sample performance

Keywords: Finfluencers, social media, mixture modeling, retail traders, homophily, belief bias

JEL Classification: G12, G14, G41

Suggested Citation

Kakhbod, Ali and Kazempour, Seyed Mohammad and Livdan, Dmitry and Schuerhoff, Norman, Finfluencers (July 5, 2023). Swiss Finance Institute Research Paper No. 23-30, Available at SSRN: https://ssrn.com/abstract=4428232 or http://dx.doi.org/10.2139/ssrn.4428232

Ali Kakhbod (Contact Author)

University of California, Berkeley ( email )

Haas School of Business
2220 Piedmont Ave
Berkeley, CA 94720
United States

Seyed Mohammad Kazempour

Louisiana State University ( email )

Baton Rouge, LA 70803-6308
United States

Dmitry Livdan

University of California, Berkeley ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
(510) 642-4733 (Phone)

Norman Schuerhoff

Swiss Finance Institute - HEC Lausanne ( email )

Chavannes-près-Renens
Switzerland

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