Verifiable Content in Social Media Stock-Analysis Articles: The Long and Short of It

Abstract

Investment-related social media platforms are transforming the traditional intermediary landscape by rapidly disseminating user-empowered opinions and recommendations, raising concerns about the credibility of information on such platforms. We examine the differential content verifiability of SeekingAlpha.com articles with sell recommendations (short articles) versus articles with buy recommendations (long articles). We find that short articles contain greater verifiable content than long articles, and verifiable content in short articles generates greater market reactions and better mitigates return reversals than that in long articles. This asymmetry contrasts prior research evidence that greater content verifiability accompanies traditional sell-side analyst reports with buy recommendations. Our results are robust to various confounding factors, including author effects, among others. Our results become more pronounced in the presence of greater retail ownership. Taken together, our results provide new evidence on investors' assessment of the credibility of information on social media platforms.

Keywords: SeekingAlpha, social media, asymmetry, credibility, verifiable content, SEC filings, hyperlinks, trading volume, abnormal returns, return reversal, misleading information JEL Code: G11