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://papers.ssrn.com/sol3/papers.cfm?abstract_id=3908275&dgcid=ejournal_htmlemail_capital:markets:market:efficiency:ejournal_abstractlink |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) | Media and Textual Analysis |
Extrapolative beliefs in the cross-section: What can we learn from the crowds?
| Authors | Da, Huang, Jin |
| Journal | Journal of Financial Economics |
| Year | 2021 |
| Type | Published Paper |
| Abstract | Using novel data from a crowdsourcing platform for ranking stocks, we investigate how investors form expectations about stock returns over the next week. We find that investors extrapolate from stocks' recent past returns, with more weight on more recent returns, especially when recent returns are negative, salient, or from a dispersed cross-section. Such extrapolative beliefs are stronger among nonprofessionals and large stocks. Moreover, consensus rankings negatively predict returns over the next week, more so among stocks with low institutional ownership and a high degree of extrapolation. A trading strategy that sorts stocks on investor beliefs generates an economically significant profit. |
| Keywords | Return extrapolation, beliefs in the cross-section, expectation formation |
| URL | https://www.sciencedirect.com/science/article/pii/S0304405X20302786 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Media and Textual Analysis |
Media attention and stock categorization: an examination of stocks hyped to benefit from the Olympics
| Authors | Dechow, Lawrence, Luo, Stamenov |
| Year | 2021 |
| Type | Working Paper |
| Abstract | We investigate whether there are temporary valuation impacts on stocks that media outlets list as involved in a major sporting event (the summer Olympics). We examine five summer Olympics and identify stocks that media outlets hype as benefiting from the Olympics (Olympic stocks). We find that Olympic stocks exhibit increases in comovement of returns after the announcement of the winning bid and declines in comovements after the games are played, consistent with the Olympics being used by investors as a category for investment. Furthermore, Olympic stock returns outperform their matched counterparts over this time period. If the comovement and valuation benefits are due to changes in underlying economics then we expect to observe corresponding increases in comovements of fundamentals and improvements in profitability. However, we find no observable changes in fundamental comovements or profitability. Consistent with investor sentiment driving the categorization, we find that Olympic firms with a greater retail investor presence have stronger comovements effects; and trading volume and volatility are abnormally high for Olympic firms on days where media outlets have stories linking the firm to the Olympic games. To clarify event-based categorization occurs in other settings where media outlets classify stocks for investment, we show comovement increases for stocks classified as "Stay-at-Home" by analysts and the media and "Meme"Â by retail investors on the Reddit social media platform. |
| Keywords | Sports events, media, Olympics, Olympic stocks, retail investors, valuation, fundamentals, comovement, categorization, investor sentiment, investor recognition, common factor, Stay-at-Home, Meme. |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3881333 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Media and Textual Analysis |
Social media analysts and sell-side analyst research
| Authors | Drake, Moon, Twedt, Warren |
| Year | 2021 |
| Type | Working 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://ssrn.com/abstract=3918541 |
| Tags | Archival Empirical | Media and Textual Analysis |
A theory of financial media
| Authors | Goldman, Martel, Schneemeier |
| Journal | Journal of Financial Economics |
| Year | 2021 |
| Type | Published Paper |
| Abstract | We present a model of media coverage of corporate announcements. Firms strategically use the media to communicate corporate announcements to a group of traders who observe announcements not directly but through media reports. Journalists strategically select which announcements to report to readers. Media coverage inadvertently incentivizes firms to manipulate the underlying announcements. In equilibrium, media coverage is tilted towards less manipulated negative news. The presence of financial journalists leads to more manipulation but makes stock prices more informative on average. We provide additional predictions regarding the media's impact on the quality of firm announcements and stock prices. |
| Keywords | financial journalism, disclosure, manipulation, price quality |
| URL | https://doi.org/10.1016/j.jfineco.2021.06.038 |
| Tags | Asset Pricing, Trading Volume and Market Efficiency | Manager / Firm Behavior | Media and Textual Analysis | Theory |
Social networks and market reactions to earnings news
| Authors | Hirshleifer, Peng, Wang |
| Year | 2021 |
| Type | Working Paper |
| Abstract | Using social network data from Facebook, we show that earnings announcements made by firms located in counties with higher investor social network centrality attract more attention from both retail and institutional investors. For such firms, the immediate price and volume reactions to earnings announcements are stronger, and post-announcement drift is weaker. Such firms have lower post-announcement persistence of return volatility but higher persistence in investor attention and trading volume. These effects are stronger for small firms, firms with poor analyst and media coverage, and for stocks with salient returns. Our evidence suggests a dual role of social networks-they facilitate the incorporation of public information into prices, but also trigger persistent excessive trading. |
| Keywords | Social networks, investor attention, earnings announcement, information diffusion, disagreement |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3824022 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) | Investment Decisions (Institutional) | Media and Textual Analysis | Propagation of Noise / Undesirable Outcomes | Social Network Structure |
The rise of Reddit: How social media affects retail investors and short-sellers' roles in price discovery
| Authors | Hu, Jones, Zhang, Zhang |
| Year | 2021 |
| Type | Working Paper |
| Abstract | Using 2020-2021 data from social media platform Reddit, we examine connections among stock prices, retail trading, short-selling and social media activity. Higher Reddit traffic, more positive tone, and higher Reddit connectedness predict higher returns, greater and more positive retail order flow, and lower shorting flows the next day. Social media information content is distinct from retail order and shorting information content. Higher Reddit traffic, more positive tone, more disagreement and higher Reddit connectedness increase shorting flow's information content. Robinhood 50 stocks are more affected by social media activity, with stronger links among retail order flow, shorting flows and future returns. |
| Keywords | Social media, short selling, intraday trading, retail investors |
| URL | https://ssrn.com/abstract=3807655 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Media and Textual Analysis |
The rise of Reddit: how social media affects retail investors and short-sellersâ roles in price discovery
| Authors | Hu, Jones, Zhang, Zhang |
| Year | 2021 |
| Type | Working Paper |
| Abstract | Using 2020-2021 data from social media platform Reddit, we examine connections among stock prices, retail trading, short-selling and social media activity. Higher Reddit traffic, more positive tone, and higher Reddit connectedness predict higher returns, greater and more positive retail order flow, and lower shorting flows the next day. Social media information content is distinct from retail order and shorting information content. Higher Reddit traffic, more positive tone, more disagreement and higher Reddit connectedness increase shorting flowâs information content. Robinhood 50 stocks are more affected by social media activity, with stronger links among retail order flow, shorting flows and future returns. |
| Keywords | social media, short selling, intraday trading, retail investors |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3807655&dgcid=ejournal_htmlemail_behavioral:experimental:finance:(editor%27s:choice):ejournal_abstractlink |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Media and Textual Analysis | Social Network Structure |
The impact of restricting labor mobility on corporate investment and entrepreneurship
| Authors | Jeffers |
| Year | 2021 |
| Type | Working Paper |
| Abstract | This paper examines how labor frictions affect investment rate and new firm entry. Using matched employee-employer data from LinkedIn, I first show that increases in the enforceability of non-compete agreements lead to widespread declines in employee departures across seniority levels, driven by workers in knowledge-intensive occupations. Investment rates at existing firms increase, especially for firms that employ more skilled workers. This comes at the expense of new firm entry, which declines substantially in knowledge-intensive sectors. The results suggest that labor frictions play an important role in investment decisions, and that NCs may factor into slowing business dynamism. |
| Keywords | Labor mobility, entrepreneurship, investment, non-competes, human capital |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3040393 |
| Tags | Archival Empirical | Investment Decisions (Institutional) | Manager / Firm Behavior | Media and Textual Analysis |
CEO social media presence and insider trading
| Authors | Li, Liang,Tang |
| Year | 2021 |
| Type | Working Paper |
| Abstract | Prior research finds that online social media usage may lower self-control and encourage indulgent behavior in laboratory subjects. We find that corporate CEOs show similar tendencies: CEOs with online social media presence are more likely to succumb to lower self-control and abuse their information advantage to profit from unethical insider trades. Specifically, CEOs' social media presence strongly predicts their insider trading activity in terms of incidence, intensity (amount and frequency), and profitability. We further find that the effect is driven by insider buys (not by sells) and is more pronounced for opportunistic buys which tend to contain more material non-public information. |
| Keywords | insider trading, social media, CEO misconduct, business ethics |
| URL | https://ssrn.com/abstract=3909886 |
| Tags | Archival Empirical | Manager / Firm Behavior | Media and Textual Analysis |
Economic narratives and market outcomes: A semi-supervised topic modeling approach
| Authors | Mai, Pukthuanthong |
| Year | 2021 |
| Type | Working Paper |
| Abstract | We employ sLDA to extract the narratives discussed by Shiller (2019) from 7 million NYT articles over 150 years. The estimation addresses look-ahead bias and changes in semantics. Panic and the narrative index positively predict market return and negatively predict volatility. Panic presents time-varying risk aversion. The narrative predictability increases recently at both market and portfolio and monthly and daily intervals. The narrative index constructed from 2 million WSJ articles over 130 years retains its predictive power, but Stock Bubble emerges as a negative market predictor. Media customizes their narratives to their readers, having a diverse effect on the market. |
| Keywords | Narratives, LDA, topic modeling, predictability, textual analysis, history |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3990324 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Media and Textual Analysis |
Investor attention or investor sentiment: How does social media react to ESG?
| Authors | Zhang, Xu, Hong |
| Year | 2021 |
| 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, there still lacks a consensus on the underlying mechanism connecting ESG and firm value. We argue that ESG can impact firm value through two possible channels:investor attention and investor sentiment. Exploiting user-generated content from a popular online investment community (Seeking Alpha) and ESG ratings from a professional database (Sustainalytics), we run a fixed-effect panel regression and find an overall positive relationship between ESG ratings and investor attention but no relationship between ESG ratings and investor sentiment. We then conduct an event-study analysis, in which we classify changes in ESG ratings as upgrade events and downgrade events and find that the significant relationship between ESG and investor attention still holds for the downgrade events but not for the upgrade ones. We 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 ratings 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 channel through which ESG affects firm value in the age of social media. |
| Keywords | ESG, investor attention, investor sentiment, social media, online investment communities |
| URL | https://ssrn.com/abstract=3905195 |
| Tags | Archival Empirical | Media and Textual Analysis |
Presidential address: Social transmission bias in economics and finance
| Authors | Hirshleifer |
| Journal | Journal of Finance |
| Year | 2020 |
| Type | Published Paper |
| Abstract | I discuss a new intellectual paradigm, social economics and finance--the study of the social processes that shape economic thinking and behavior. This emerging field recognizes that people observe and talk to each other. A key, underexploited building block of social economics and finance is social transmission bias: systematic directional shift in signals or ideas induced by social transactions. I use five "fables" (models) to illustrate the novelty and scope of the transmission bias approach, and offer several emergent themes. For example, social transmission bias compounds recursively, which can help explain booms, bubbles, return anomalies, and swings in economic sentiment. |
| Keywords | Social transmission bias, social economics, social finance, behavioral economics, behavioral finance, social networks, social learning, information percolation, biased percolation, epidemiology, visibility bias, self-enhancing transmission bias, simplistic thinking, memes, cultural evolution |
| URL | https://onlinelibrary.wiley.com/doi/pdf/10.1111/jofi.12906 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Evolutionary Finance | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) | Investment Decisions (Institutional) | Manager / Firm Behavior | Media and Textual Analysis | Propagation of Noise / Undesirable Outcomes | Social Transmission Biases | Theory |
Corporate culture as an implicit contract
| Authors | Jeffers, Lee |
| Year | 2019 |
| Type | Working Paper |
| Abstract | We develop a measure of corporate culture using coworker connectivity on LinkedIn's platform, and show it is strongly correlated with positive employee relations and satisfaction. Using state-level changes to employment agreements as shocks to explicit contracts, we find that these changes significantly impact employees in weakly connected firms, but have little to no effect on those at strongly connected firms. Our results suggest that firms with strong corporate culture are less dependent on explicit contracts to retain human capital. We document implications for firms' investment decisions and other outcomes. |
| Keywords | Corporate culture, human capital, implicit contracts, non-competes |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3426060 |
| Tags | Archival Empirical | Investment Decisions (Institutional) | Manager / Firm Behavior | Media and Textual Analysis | Social Network Structure |
News media and delegated information choice
| Authors | Nimark, Pitschner |
| Journal | Journal of Economic Theory |
| Year | 2019 |
| Type | Published Paper |
| Abstract | No agent has the resources to monitor all events that are potentially relevant for his decisions. Therefore, many delegate their information choice to specialized news providers that monitor the world on their behalf and report only a curated selection of events. We document empirically that, while different outlets typically emphasize different topics, major events shift the general news focus and make coverage more homogeneous. We propose a theoretical framework that formalizes this type of state-dependent editorial behavior by introducing news selection functions. We prove that (i) agents can always reduce the entropy of their posterior beliefs by delegating their information choice, (ii) state-dependent reporting conveys information not only via the contents of a story, but also via the decision of what to report, and (iii) an event that is reported by all news providers is common knowledge among agents only if it is also considered maximally newsworthy by all providers. As an application, we embed delegated news selection into a simple beauty-contest model to demonstrate how it affects actions in a setting with strategic interactions. |
| Keywords | news media, delegated information choice, latent dirichlet allocation, common knowledge, strategic games, beauty contest |
| URL | https://doi.org/10.1016/j.jet.2019.02.001 |
| Tags | Media and Textual Analysis | Theory |
Can Twitter help predict firm-level earnings and stock returns?
| Authors | Bartov, Faurel, Mohanram |
| Journal | The Accounting Review |
| Year | 2018 |
| Type | Published Paper |
| Abstract | Prior research has examined how companies exploit Twitter in communicating with investors, and whether Twitter activity predicts the stock market as a whole. We test whether opinions of individuals tweeted just prior to a firm's earnings announcement predict its earnings and announcement returns. Using a broad sample from 2009 to 2012, we find that the aggregate opinion in individual tweets successfully predicts a firm's forthcoming quarterly earnings and announcement returns. These results hold for tweets that convey original information, as well as tweets that disseminate existing information, and are stronger for tweets providing information directly related to firm fundamentals and stock trading. Importantly, our results hold even after controlling for concurrent information or opinion from traditional media sources, and are stronger for firms in weaker information environments. Our findings highlight the importance of considering the aggregate opinion in individual tweets when assessing stocks' future prospects and value. |
| Keywords | Twitter, social media, wisdom of crowds, earnings, analyst earnings forecast, abnormal stock returns |
| URL | https://publications.aaahq.org/accounting-review/article-abstract/93/3/25/4062/Can-Twitter-Help-Predict-Firm-Level-Earnings-and?redirectedFrom=fulltext |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Manager / Firm Behavior | Media and Textual Analysis |
Headline salience, managerial opportunism, and over-and underreactions to earnings
| Authors | Huang, Nekrasov, Teoh |
| Journal | The Accounting Review |
| Year | 2018 |
| Type | Published Paper |
| Abstract | Limited attention theory predicts that higher salience of earnings news implies a stronger immediate market reaction to earnings news and a weaker post-earnings announcement drift (PEAD) or reversal (PEAR). Using a new measure, SALIENCE, defined as the number of quantitative items in an earnings press release headline, we find strong evidence consistent with salience effects. Higher SALIENCE is associated with stronger announcement reaction and subsequent PEAR. Managers are more likely to choose higher SALIENCE before selling shares in the post-announcement period and when earnings are high, but less persistent, and to choose lower SALIENCE before stock option grants. The results are robust to using residual salience and an extended set of control variables. The findings are consistent with managers opportunistically headlining positive financial information in the earnings press release to incite over-optimism in investors with limited attention. |
| URL | https://doi.org/10.2308/accr-52010 |
| Tags | Archival Empirical | Manager / Firm Behavior | Media and Textual Analysis |
What happens in vegas stays on TripAdvisor? A theory and technique to understand narrativity in consumer reviews
| Authors | Laer, Escalas, Ludwig, Hende |
| Journal | Journal of Consumer Research |
| Year | 2018 |
| Type | Published Paper |
| Abstract | Many consumers base their purchase decisions on online consumer reviews. An overlooked feature of these texts is their narrativity: the extent to which they tell a story. The authors construct a new theory of narrativity to link the narrative content and discourse of consumer reviews to consumer behavior. They also develop from scratch a computerized technique that reliably determines the degree of narrativity of 190,461 verbatim, online consumer reviews and validate the automated text analysis with two controlled experiments. More transporting (i.e., engaging) and persuasive reviews have better-developed characters and events as well as more emotionally changing genres and dramatic event orders. This interdisciplinary, multimethod research should help future researchers (1) predict how narrativity affects consumers' narrative transportation and persuasion, (2) measure the narrativity of large digital corpora of textual data, and (3) understand how this important linguistic feature varies along a continuum. |
| Keywords | Automated text analysis, computational linguistics, consumer reviews, narrative persuasion, narrative transportation, storytelling |
| URL | https://doi.org/10.1093/jcr/ucy067 |
| Tags | Archival Empirical | Consumer Decisions | Media and Textual Analysis | Theory |
Causal inference in word-of-mouth research: methods and results
| Authors | Seiler, Yao, Zervas |
| Book | Customer Analytics for Maximum Impact: Academic Insights and Business Use Cases |
| Year | 2018 |
| Type | Book | Literature Review Paper |
| Abstract | One of the biggest changes in the marketing landscape in recent years has been a shift toward fostering word-of-mouth (WOM) to let consumers advocate on a brand's behalf. Many marketing executives consider online WOM, which has increased dramatically in volume in recent years, one of the most effective forms of marketing. Every second, 6,000 tweets are posted on Twitter, and that volume is growing at around 30% per year. Similar patterns apply to other social media platforms such as Facebook, as well as to platforms that host costumer reviews. TripAdvisor and Yelp host 570 million and 142 million reviews, respectively, and are visited by 455 million and 188 million users each month. However, reliably measuring the impact of WOM on demand is subject to some unique challenges, and many marketing managers admit that measuring WOM effectiveness remains difficult. In this chapter, we outline the current state of the academic literature regarding the impact of online WOM on demand. We first outline measurement challenges in the realm of WOM and how they can be resolved. We then summarize recent findings on the effectiveness of WOM in two domains: customer reviews and online conversations about brands on platforms such as Twitter or other social media. The former are a type of activity that typically occur after consumption and that impose a specific structure (often a rating scale) on consumers' WOM. The latter instead are less structured and can take place before and/or after consumption. These two areas are sufficiently different and shall be treated separately. |
| URL | http://people.bu.edu/zg/publications/wom-causal-inference.pdf |
| Tags | Archival Empirical | Consumer Decisions | Media and Textual Analysis |
The spread of true and false news online
| Authors | Vosoughi, Roy, Aral |
| Journal | Science |
| Year | 2018 |
| Type | Published Paper |
| Abstract | We investigated the differential diffusion of all of the verified true and false news stories distributed on Twitter from 2006 to 2017. The data comprise ~126,000 stories tweeted by ~3 million people more than 4.5 million times. We classified news as true or false using information from six independent fact-checking organizations that exhibited 95 to 98% agreement on the classifications. Falsehood diffused significantly farther, faster, deeper, and more broadly than the truth in all categories of information, and the effects were more pronounced for false political news than for false news about terrorism, natural disasters, science, urban legends, or financial information. We found that false news was more novel than true news, which suggests that people were more likely to share novel information. Whereas false stories inspired fear, disgust, and surprise in replies, true stories inspired anticipation, sadness, joy, and trust. Contrary to conventional wisdom, robots accelerated the spread of true and false news at the same rate, implying that false news spreads more than the truth because humans, not robots, are more likely to spread it. |
| URL | https://doi.org/10.1007/978-981-16-3398-0_15 |
| Tags | Archival Empirical | Media and Textual Analysis | Propagation of Noise / Undesirable Outcomes | Social Transmission Biases |