Wisdom of Crowds: The Value of Stock Opinions Transmitted Through Social Media

Hailiang Chen · Prabuddha De · Yu Jeffrey Hu · Byoung‐Hyoun Hwang

1,249 citations0/0 files storedReview of Financial Studies

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Financial Markets and Investment Strategies FinTech, Crowdfunding, Digital Finance Stock Market Forecasting Methods

Abstract

Social media has become a popular venue for individuals to share the results of their own analysis on financial securities. This paper investigates the extent to which investor opinions transmitted through social media predict future stock returns and earnings surprises. We conduct textual analysis of articles published on one of the most popular social media platforms for investors in the United States. We also consider the readers' perspective as inferred via commentaries written in response to these articles. We find that the views expressed in both articles and commentaries predict future stock returns and earnings surprises.

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References

2011When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10‐Ks 2007Giving Content to Investor Sentiment: The Role of Media in the Stock Market 2000Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors 1998Are Investors Reluctant to Realize Their Losses?2011In Search of Attention 2008Annual report readability, current earnings, and earnings persistence 1997Measuring Mutual Fund Performance with Characteristic‐Based Benchmarks 2004Is All That Talk Just Noise? The Information Content of Internet Stock Message Boards

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2016Textual Analysis in Accounting and Finance: A Survey 2018Detection and Resolution of Rumours in Social Media 2017Can Twitter Help Predict Firm-Level Earnings and Stock Returns?2017Intraday online investor sentiment and return patterns in the U.S. stock market 2015The Operational Value of Social Media Information 2018

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