Seeking Alpha: More Sophisticated Than Meets the Eye

Abstract

We investigate the timeliness and relevance of the crowd-sourced investment advice platform Seeking Alpha (SA) for retail and more sophisticated investors. We show that SA article sentiment provides significant directional information for immediate market returns and 90day drift returns. Following the publication of SA articles, we observe changes in the option volatility spread and volatility skew. Both stock and options market investors respond to SA information, which appears to contain information beyond common risk factors and earnings announcement information, indicating its relevance for more sophisticated investors. A hedged portfolio strategy based on SA sentiment generates significantly positive monthly returns.

Keywords: Seeking Alpha, social media, textual analysis