Seeking Alpha: More Sophisticated Than Meets the Eye

58 Pages Posted: 3 Apr 2024

See all articles by Duo Selina Pei

Duo Selina Pei

University of Warwick - Warwick Business School

Abhinav Anand

Indian Institute of Management Bangalore

Xing Huan

EDHEC Business School

Date Written: January 2, 2024

Abstract

This study investigates the information content of articles from the crowd-sourced investment advice platform Seeking Alpha (SA), focusing on its timeliness and relevance for more sophisticated investors. Textual analysis is employed to extract positive and negative sentiment from economic events in SA documents. We find that SA article sentiment provides directional information for both immediate market returns and 90-day drift returns, which is incremental to the information in the most recent earnings surprise and earning announcement returns. Both stock and options market investors react to SA information, indicating its relevance for both retail and more sophisticated investors. We also observe changes in option volatility spread and volatility skew following the publication of SA articles. Furthermore, SA information appears to be incremental to common risk factors. A hedged portfolio strategy that buys the firms with the most positive SA sentiment and sells those with the most negative sentiment yields positive monthly returns after controlling for size, market-to-book, and momentum.

Keywords: Seeking Alpha, social media, textual analysis, options market

Suggested Citation

Pei, Duo and Anand, Abhinav and Huan, Xing, Seeking Alpha: More Sophisticated Than Meets the Eye (January 2, 2024). Available at SSRN: https://ssrn.com/abstract=4747465 or http://dx.doi.org/10.2139/ssrn.4747465

Duo Pei (Contact Author)

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Abhinav Anand

Indian Institute of Management Bangalore ( email )

Bannerghatta Road
Bangalore, 560 076
India

Xing Huan

EDHEC Business School ( email )

393 Promenade des Anglais
Nice, Provence-Alpes-Côte d'Azu 06202
France

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