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

Review of Financial Studies (RFS), Forthcoming

52 Pages Posted: 12 Apr 2011 Last revised: 4 Oct 2016

See all articles by Hailiang Chen

Hailiang Chen

HKU Business School, The University of Hong Kong

Prabuddha De

Purdue University - Krannert School of Management

Yu Jeffrey Hu

Purdue University

Byoung-Hyoun Hwang

Nanyang Business School, Nanyang Technological University

Date Written: December 8, 2013

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.

Keywords: Investor-turned-advisors, Social media, Financial markets

JEL Classification: G11, G12, G14

Suggested Citation

Chen, Hailiang and De, Prabuddha and Hu, Yu Jeffrey and Hwang, Byoung-Hyoun, Wisdom of Crowds: The Value of Stock Opinions Transmitted Through Social Media (December 8, 2013). Review of Financial Studies (RFS), Forthcoming, Available at SSRN: https://ssrn.com/abstract=1807265 or http://dx.doi.org/10.2139/ssrn.1807265

Hailiang Chen (Contact Author)

HKU Business School, The University of Hong Kong ( email )

Hong Kong
China

HOME PAGE: http://https://www.hkubs.hku.hk/people/hailiang-chen

Prabuddha De

Purdue University - Krannert School of Management ( email )

403 West State Street
West Lafayette, IN 47907-2056
United States
765-494-0699 (Phone)

HOME PAGE: http://www.krannert.purdue.edu/directory/bio.asp?username=pde

Yu Jeffrey Hu

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

Byoung-Hyoun Hwang

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore

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