Finfluencers
| Authors | Kakhbod, Kazempour, Livdan, Schuerhoff |
| Year | 2023 |
| Type | Working Paper |
| 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 |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4428232 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Media and Textual Analysis | Propagation of Noise / Undesirable Outcomes |
Expression modalities: How speaking versus writing shapes word of mouth
| Authors | Berger, Rocklage, Packard |
| Journal | Journal of Consumer Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Consumers often communicate their attitudes and opinions with others, and such word of mouth has an important impact on what others think, buy, and do. But might the way consumers communicate their attitudes (i.e., through speaking or writing) shape the attitudes they express? And, as a result, the impact of what they share? While a great deal of research has begun to examine drivers of word of mouth, there has been less attention to how communication modality might shape sharing. Six studies, conducted in the laboratory and field, demonstrate that compared to speaking, writing leads consumers to express less emotional attitudes. The effect is driven by deliberation. Writing offers more time to deliberate about what to say, which reduces emotionality. The studies also demonstrate a downstream consequence of this effect: by shaping the attitudes expressed, the modality consumers communicate through can influence the impact of their communication. This work sheds light on word of mouth, effects of communication modality, and the role of language in communication. |
| Keywords | Word of mouth, communication modality, emotion, speaking, writing, automated text analysis |
| URL | https://academic.oup.com/jcr/article-abstract/49/3/389/6483086?redirectedFrom=fulltext |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Media and Textual Analysis |
Using social media to identify the effects of congressional viewpoints on asset prices
| Authors | Bianchi, Cram, Kung |
| Year | 2022 |
| Type | Working Paper |
| Abstract | This paper examines the extent to which individual politicians affect asset prices using a high-frequency identification approach. We exploit the regular flow of viewpoints contained in a large volume of tweets from members of US Congress. Congressional tweets targeting individual firms are collected and classified based on their tone. Supportive (critical) tweets increase (decrease) stock prices of the targeted firm in minutes around the tweet. The price response persists for several days, during which analysts revise their forecasts about the firm cash flows. Selected politician tweets linked to legislation affect the stock prices of firms in the same industry as the targeted firm. The timeline of politician viewpoints within a particular bill exhibits surges in relevant news that predict roll call votes months before the signing of the bill. We highlight how the social media accounts of politicians are a valuable source of political news. |
| Keywords | Asset pricing, high-frequency identification, partisanship, social media |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3846121&dgcid=ejournal_htmlemail_capital:markets:market:efficiency:ejournal_abstractlink |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Media and Textual Analysis |
Social media and short sellers
| Authors | Cai, McLean, Zhang, Zhao |
| Year | 2022 |
| Type | Working Paper |
| Abstract | We ask how social media impacts the role of short sellers in financial markets. We find some evidence consistent with manipulation. Prior to high short interest, a stock's social media tone is abnormally positive, but its traditional media tone is not. Once highly shorted, social media tone flips and is abnormally negative. Using the firm-by-firm introduction and temporary suspension of short selling in China as natural experiments, we find that both the volatility of social media tone and the number of posts increase when a firm becomes shortable, and then decrease when shorting was suspended. Highly shorted firms with pump-and-dump social media patterns also have pump-and-dump stock return patterns and abnormally high trading volume. Manipulative social media tone is more likely when there are more posts from active social media users, who are perhaps better able to influence other users. Our findings are consistent with the idea that social networks and social media can enable manipulation. |
| Keywords | Short selling, social media, manipulation, arbitrage |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3907480&dgcid=ejournal_htmlemail_capital:markets:market:efficiency:ejournal_abstractlink |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Experimental / Survey-Based Empirical | Media and Textual Analysis | Social Network Structure |
Meet the press: Survey evidence on financial journalists as information intermediaries
| Authors | Call, Emett, Maksymov, Sharp |
| Journal | Journal of Accounting and Economics |
| Year | 2022 |
| Type | Published Paper |
| Abstract | We survey 462 financial journalists and conduct 18 interviews to obtain insights on the inputs to their reporting, the incentives they face, and the factors that influence their coverage decisions. We report many findings relevant to the accounting literature and identify multiple avenues for future research. For example, financial journalists say the likelihood they write about a specific company or CEO increases when the company is controversial or the CEO has a colorful personality, suggesting journalists gravitate toward provocative topics. We also find that financial journalists routinely use company-issued disclosures and private phone calls with company management when developing articles, and that they believe they are evaluated primarily on the accuracy, timeliness, and depth of their articles. Journalists also believe monitoring companies to hold them accountable is one of financial journalism's most important objectives, but they often face negative consequences for writing articles that portray companies in an unfavorable light. |
| Keywords | Business press, financial journalists, media Information, intermediaries, social media, financial analysts |
| URL | https://doi.org/10.1016/j.jacceco.2021.101455 |
| Tags | Archival Empirical | Experimental / Survey-Based Empirical | Manager / Firm Behavior | Media and Textual Analysis | Social Network Structure |
Meet the press: survey evidence on financial journalists as information intermediaries
| Authors | Call, Emett, Maksymov, Sharp |
| Journal | Journal of Accounting and Economics |
| Year | 2022 |
| Type | Published Paper |
| Abstract | We survey 462 financial journalists and conduct 18 interviews to obtain insights on the inputs to their reporting, the incentives they face, and the factors that influence their coverage decisions. We report many findings relevant to the accounting literature and identify multiple avenues for future research. For example, financial journalists say the likelihood they write about a specific company or CEO increases when the company is controversial or the CEO has a colorful personality, suggesting journalists gravitate toward provocative topics. We also find that financial journalists routinely use company-issued disclosures and private phone calls with company management when developing articles, and that they believe they are evaluated primarily on the accuracy, timeliness, and depth of their articles. Journalists also believe monitoring companies to hold them accountable is one of financial journalism's most important objectives, but they often face negative consequences for writing articles that portray companies in an unfavorable light. |
| Keywords | business press, financial journalists, media, information intermediaries, social media, financial analysts |
| URL | https://www.sciencedirect.com/science/article/abs/pii/S0165410121000707 |
| Tags | Experimental / Survey-Based Empirical | Media and Textual Analysis | Social Transmission Biases |
Epidemiological expectations
| Authors | Carroll, Wang |
| Year | 2022 |
| Type | Working Paper | Literature Review Paper |
| Abstract | 'Epidemiological' models of belief formation put social interactions at their core; such models are widely used by scholars who are not economists to study the dynamics of beliefs in populations. We survey the literature in which economists attempting to model the consequences of beliefs about the future -'expectations'- have employed a full-fledged epidemiological approach to explore an economic question. We draw connections to related work on 'contagion,' narrative economics, news/rumor spreading, and the spread of internet memes. A main theme of the paper is that a number of independent developments have recently converged to make epidemiological expectations ('EE') modeling more feasible and appealing than in the past. |
| Keywords | Economic expectations, epidemiological expectations, social interactions, social dynamics, information diffusion, economic narratives |
| URL | https://www.nber.org/papers/w30605?utm_campaign=ntwh&utm_medium=email&utm_source=ntwg4 |
| Tags | Asset Pricing, Trading Volume and Market Efficiency | Consumer Decisions | Financing- and Investment Decisions (Individual) | Investment Decisions (Institutional) | Manager / Firm Behavior | Media and Textual Analysis | Propagation of Noise / Undesirable Outcomes | Social Network Structure | Social Transmission Biases | Theory |
Can social media inform corporate decisions? Evidence from merger withdrawals
| Authors | Cookson, Niessner, Schiller |
| Year | 2022 |
| Type | Working Paper |
| Abstract | This paper examines how social media informs corporate decisions by studying the decision of firm management to withdraw an announced merger. A standard deviation decline in abnormal social media sentiment following a merger announcement predicts a 0.64 percentage point increase in the likelihood of merger withdrawal (16.6% of the baseline rate). The informativeness of social media for merger withdrawals is not explained by abnormal price reactions or news sentiment. Consistent with learning from external information, we find that the social media signal is more informative after a firm adopts a corporate Twitter account, which offers a conduit for listening to investor feedback. In addition, most of the informativeness is driven by investors who reference fundamental information, not price trends, and is driven by longer tweets that likely contain investment analysis. The social media signal is also more informative for complex mergers in which analyst conference calls take a negative tone, driven by the Q&A portion of the call. Overall, these findings imply that social media is not a sideshow, but an important aspect of firm information environment. |
| Keywords | Social media, FinTech, feedback effects, capital allocation, M&A |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4059633 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Manager / Firm Behavior | Media and Textual Analysis |
Should retail investors listen to social media analysts? Evidence from text-implied beliefs
| Authors | Dim |
| Year | 2022 |
| Type | Working Paper |
| Abstract | This paper uses machine learning to infer nonprofessional social media investment analysts' (SMAs) beliefs from their opinions on individual stocks. SMAs' average beliefs predict future abnormal returns and earnings surprises. However, there exists substantial heterogeneity in SMAs' ability to form beliefs that yield investment value. Some 13% high-skilled SMAs form beliefs that yield a sizeable one-week three-factor alpha of 61 bps, while the remaining 87% low-skilled SMAs generate only 6 bps. Firm and industry specializations are the most distinctive characteristics of high-skilled SMAs. When forming beliefs, SMAs extrapolate from past returns and herd on the consensus view of their peers. However, these seemingly behavioral biases do not result in systematically wrong beliefs. |
| Keywords | Nonprofessional analysts, belief formation, investor skill, market efficiency, herding, extrapolation, machine learning, natural language processing |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3813252 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Media and Textual Analysis | Social Network Structure |
Social media analysts and sell-side analyst research
| Authors | Drake, Moon, Twedt, Warren |
| Journal | Review of Accounting Studies |
| Year | 2022 |
| Type | Published Paper |
| Abstract | We examine how research posted by "social media analysts" (SMAs) - individuals posting equity research online via social media investment platforms - is related to research subsequently produced by professional sell-side equity analysts. Using data from Seeking Alpha, we find that the market reaction to sell-side analyst research is substantially reduced when the analyst research is preceded by the report of an SMA, and that this is particularly true of sell-side analysts' earnings forecasts. We further find that this effect is more pronounced when SMA reports contain more decision-useful language, are produced by SMAs with greater expertise, and relate to firms with greater retail investor ownership. We also provide evidence that the attenuated response to sell-side research is most likely explained by SMA research preempting information in sell-side research and that analysts respond to SMA preemption with bolder and more disaggregated forecasts. Collectively, our results suggest that equity research posted online by SMAs provides investors with information that is similar to but arrives earlier than sell-side equity research, and speak to the connected and evolving roles of information intermediaries in capital markets. |
| Keywords | Social media analyst, sell-side analyst, information intermediaries, equity research |
| URL | https://link.springer.com/article/10.1007/s11142-021-09645-1 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Media and Textual Analysis |
Labor reactions to credit deterioration: Evidence from LinkedIn activity
| Authors | Gortmaker, Jeffers, Lee |
| Year | 2022 |
| Type | Working Paper |
| Abstract | We analyze worker reactions to firms' credit deterioration. Using weekly anonymized networking activity on LinkedIn, we show workers initiate more connections immediately following a negative credit event, even at firms far from bankruptcy. Our results suggest that workers are driven by concerns about both unemployment and future prospects at their firm. Heightened networking activity is associated with contemporaneous and future departures, especially at highly-rated firms. Other negative events like missed earnings and equity sell recommendations do not trigger similar reactions. Overall, our results indicate that the latent build-up of connections triggered by credit deterioration represents a source of fragility for firms. |
| Keywords | Network formation, credit deterioration, labor & finance, financial distress, labor fragility |
| URL | https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=3456285 |
| Tags | Archival Empirical | Media and Textual Analysis | Social Network Structure |
Media partisanship and fundamental corporate decisions
| Authors | Knill, Liu, McConnell |
| Journal | Journal of Financial and Quantitative Analysis |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Using the introduction of Fox News as a natural experiment, we investigate whether partisanship in television news coverage influences fundamental corporate decisions.We find that during the George W. Bush presidency, firms led by Republican-leaning managers headquartered in regions into which Fox was introduced shift upward their total investment expenditures and financial leverage. Our findings imply that in making fundamental corporate decisions, Republican-leaning managers are swayed by the Republican slant of Fox that presents an optimistic macroeconomic outlook. The results highlight the importance of heterogeneity in media slant in understanding the role of the media incorporate decision making. |
| Keywords | Media slant, partisanship, corporate decision-making |
| URL | https://www.cambridge.org/core/journals/journal-of-financial-and-quantitative-analysis/article/abs/media-partisanship-and-fundamental-corporate-decisions/0E3A5D1C6B5BC003B839D0E161AAE22D#access-block |
| Tags | Archival Empirical | Experimental / Survey-Based Empirical | Manager / Firm Behavior | Media and Textual Analysis |
Differential treatment and local information advantage: Revelations from translation differences
| Authors | Lang, Stice-Lawrence, Wong, Wong |
| Year | 2022 |
| Type | Working Paper |
| Abstract | We develop an empirical proxy for the differential treatment of local and foreign investors using translation differences in public disclosure as observable indicators that reflect non-public interactions. After confirming the validity of our proxy, we show that differential treatment results in significant information asymmetry between local and foreign investors as measured through stock illiquidity, and analysis of analyst forecast errors suggests that this information asymmetry is created by firms providing foreign market participants with lower quality information. Firms respond to strategic incentives for differential treatment relating to government subsidies and capital raising, and thus differential treatment is not just a byproduct of resource constraints. Our results highlight the role of differential treatment as one driver of local information advantage. |
| Keywords | Differential treatment, local information advantage, translation differences, financial disclosure, information asymmetry, textual analysis, globalization |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3956105&dgcid=ejournal_htmlemail_capital:markets:market:efficiency:ejournal_abstractlink |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Manager / Firm Behavior | Media and Textual Analysis |
Fifty shades of hatred and discontent - varieties of anti-finance discourses on the European Twitter (France, Germany, Italy, Spain and the UK)
| Authors | Massoc |
| Year | 2022 |
| Type | Working Paper |
| Abstract | Are we in a new "Polanyian moment"? If we are, it is essential to examine how "spontaneous" and punctual expressions of discontent at the individual level may give rise to collective discourses driving social and political change. It is also important to examine whether and how the framing of these discourses may vary across political economies. This paper contributes to this endeavor with the analysis of anti-finance discourses on Twitter in France, Germany, Italy, Spain and the UK between 2019 and 2020. This paper presents three main findings. First, the analysis shows that, more than ten years after the financial crisis, finance is still a strong catalyzer of political discontent. Second, it shows that there are important variations in the dominant framing of public anti-finance discourses on social media across European political economies. If the antagonistic "us versus them" is prominent in all the cases, the identification of who "us" and "them" are, vary significantly. Third, it shows that the presence of far-right tropes in the critique of finance varies greatly from virtually inexistent to a solid minority of statements. |
| Keywords | Finance, opinion, social media, discourse analysis |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4008884&dgcid=ejournal_htmlemail_capital:markets:market:efficiency:ejournal_abstractlink |
| Tags | Archival Empirical | Media and Textual Analysis |
Social contagion and asset prices: Reddit's self-organised bull runs
| Authors | Semenova, Winkler |
| Year | 2022 |
| Type | Working Paper |
| Abstract | This paper develops an empirical and theoretical case for how `hype' among retail investors can drive large asset price fluctuations. We use text data from discussions on WallStreetBets (WSB), an online investor forum with over eleven million followers as of February 2022, as a case study to demonstrate how retail investors influence each other, and how social behaviors impact financial markets. We document that WSB users adopt price predictions about assets (bullish or bearish) in part due to the sentiments expressed by their peers. Discussions about stocks are also self-perpetuating: narratives about specific assets spread at an increasing rate before peaking, and eventually diminishing in importance -- a pattern reminiscent of an epidemiological setting. To consolidate these findings, we develop a model for the impact of social dynamics among retail investors on asset prices. We find that the interplay between 'trend following' and 'consensus formation' determines the stability of price returns, with socially-driven investing potentially causing oscillations and cycles. Our framework helps identify components of asset demand stemming from social dynamics, which we predict using WSB data. Our predictions explain significant variation in stock market activity. These findings emphasize the role that social dynamics play in financial markets, amplified by online social media. |
| Keywords | Social media analysis, sentiment contagion, asset prices |
| URL | https://arxiv.org/abs/2104.01847 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Media and Textual Analysis | Theory |
Investor attention or investor sentiment: How social media react to ESG?
| Authors | Zhang, Xu, Hong, Chan |
| Year | 2022 |
| Type | Working Paper |
| Abstract | The ESG (environmental, social, and governance) practice has become very important in contemporary business, and it is believed to have a significant impact on firm value. However, how investors react to firms' ESG performance is still unknown. Exploiting user-generated content from a popular online investment community (Seeking Alpha) and ESG performance scores from a professional database (Sustainalytics), we first run a fixed-effect panel regression and find an overall positive relationship between ESG and investor attention but no relationship between ESG and investor sentiment. We then conduct an event-study analysis, in which we classify changes in ESG performance as upgrade and downgrade events and find that the significant relationship between ESG and investor attention holds for the downgrade events but not for the upgrade events. We also conduct various robustness checks, on both ESG and investor attention, to rule out potential effects of other factors, such as firm size, debt, intangible assets, and profitability. Our further mechanism analysis reveals that the effect of ESG on investor attention is driven by the social and governance factors rather than the environmental factors. Our work makes both theoretical and practical contributions by identifying the nuanced effect of ESG on investors' reactions in the social media era. |
| Keywords | ESG, investor attention, investor sentiment, social media, online investment communities |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3905195&dgcid=ejournal_htmlemail_capital:markets:market:efficiency:ejournal_abstractlink |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Media and Textual Analysis |
Punished for doing good: Heuristic-based judgement and the contingent returns to company philanthropy under high uncertainty
| Authors | Ballesteros, Wry, Useem |
| Year | 2021 |
| Type | Working Paper |
| Abstract | Companies donating in the aftermath of large-scale disasters often suffer public backlash and managers systematically fail to understand what corresponds to a donation that stakeholders perceive as contextually appropriate. We attribute this to the level of uncertainty that obscures the relative social value of a donation because accurate information about impacts is not available for months. We argue that stakeholders rely on a company's pre-disaster reputation as a heuristic to make judgments of its philanthropy. Thus, regardless of the amount of aid given, well-regarded firms obtain rents from responding first to a disaster, and this spills over to companies in the same industry that match their donations; the opposite applies to firms with an unfavorable reputation, and to those that imitate their gifts. Analyses of donations by the largest 2,000 companies worldwide to every major epidemic, natural disaster, and terrorist attack from 2007 to 2019 support this argument and show that this heuristic effect does not transfer to firms donating different amounts. The estimates survive a battery of time-varying and joint fixed effects and tests of confounders. They confirm that reputation is a stronger rent determinant than donation amount. We discuss ways to improve managerial philanthropic decisions in similar settings. |
| Keywords | Company philanthropy, reputation, disasters, heuristics, corporate social responsibility |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3919161&dgcid=ejournal_htmlemail_capital:markets:market:efficiency:ejournal_abstractlink |
| Tags | Archival Empirical | Manager / Firm Behavior | Media and Textual Analysis | Theory |
Negative peer disclosure
| Authors | Cao, Fang, Lei |
| Journal | Journal of Financial Economics |
| Year | 2021 |
| Type | Published Paper |
| Abstract | This paper provides first evidence of negative peer disclosure (NPD), an emerging corporate strategy to publicize adverse news of industry peers on social media. Consistent with NPDs being implicit positive self-disclosures, disclosing firms experience a two-day abnormal return of 1.6%-1.7% over the market and industry. Further exploring the benefits and costs of such disclosures, we find that NPD propensity increases with the degree of product market rivalry and technology proximity and disclosing firms outperform nondisclosing peers in the product markets in the year following NPDs. These results rationalize peer disclosure and extend the scope of the literature beyond self-disclosure. |
| Keywords | Peer disclosure, spillover, product market rivalry, technology proximity, social media |
| URL | https://www.sciencedirect.com/science/article/pii/S0304405X21000404 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Manager / Firm Behavior | Media and Textual Analysis |
Listening in on investors' thoughts and conversations
| Authors | Chen, Hwang |
| Journal | Journal of Financial Economics |
| Year | 2021 |
| Type | Published Paper |
| Abstract | A large literature in neuroscience and social psychology shows that humans are wired to be meticulous about how they are perceived by others. In this paper, we propose that impression management considerations can also end up guiding the content that investors transmit via word of mouth and inadvertently lead to the propagation of noise. We analyze server log data from one of the largest investment-related websites in the United States. Consistent with our proposition, we find that investors more frequently share articles that are more suitable for impression management despite such articles less accurately predicting returns. Additional analyses suggest that high levels of sharing can lead to overpricing. |
| Keywords | Social interactions, Social transmission bias, Asset prices |
| URL | https://www.sciencedirect.com/science/article/abs/pii/S0304405X21003810 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) | Media and Textual Analysis | Propagation of Noise / Undesirable Outcomes | Social Transmission Biases |
Tesla: is now the time to invest? An examination of Tesla, social media, and its effect on stock
| Authors | Coiro |
| Year | 2021 |
| Type | Working Paper |
| Abstract | Tesla is an American electric vehicle and clean energy company. They are based in Palo Alto, California and their product base consists of electric cars, battery energy storage, solar panels, and solar roof tiles. On an average day in 2021, Tesla stock sells for $700/share. We will review historical Tesla data and examine whether this particular stock is worth the investment. In addition to historical data, this research reviews the effect of traditional news and social media on human behavior. Exploring social media analytics, investor sentiment and behavior in hopes to gauge how these factors can impact Tesla and whether this should be taken into consideration prior to the investment. |
| Keywords | Tesla, stock market, investment, social media, investor, human behavior, clean energy, solar, electric cars |
| URL | https://ssrn.com/abstract=3908275 |
| Tags | Financing- and Investment Decisions (Individual) | Media and Textual Analysis |