Does it really pay off for investors to consider information from social media? |
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| Institution: | 1. Department of Accounting, Economics and Finance, School of Business, Law and Entrepreneurship, Swinburne University of Technology, Melbourne, Australia;2. Department of Accounting, Data Analytics, Economics and Finance, La Trobe University, Melbourne, Australia;3. School of Economics, Finance and Marketing, RMIT University, Melbourne, Australia;1. School of Social Audit, Nanjing Audit University, Nanjing, China;2. School of Accounting, Economics and Finance, Curtin Business School, Perth, Australia;3. Department of Finance, National Taiwan University, No.1, Sec 4, Roosevelt Rd, Taipei City 10617, Taiwan |
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| Abstract: | This paper raises the question whether investors can learn something from social media sentiment that they do not already know from (existing) financial information disclosed by companies and financial analysts. Therefore, the relationship between financial information and Refinitiv’s MarketPsych social media sentiment index is explored. The paper introduces adjusted social media sentiment, which corrects social media sentiment for the impact of financial information such as earnings surprises, analyst forecast revisions, new dividends, and 8-K filings. It turns out that adjusted social media sentiment is related to subsequent short-term stock returns. This is particularly true for stocks with negative (adjusted) sentiment. Moreover, looking at long-term holding returns the paper does not find compelling evidence for reversals suggesting that (adjusted) social media sentiment reflects information about the prospects of the firm. |
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| Keywords: | Return predictability Fundamental information Wisdom of crowds Investor sentiment Social media |
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