New media analytics

Examining the economic value of internet, social, and mobile communication and commerce

Scholars and practitioners alike increasingly recognize the importance of stock microblogs as it captures the market discussion and advocate that the extensive real-time information stream has a significant impact on financial markets. This research examines the extent to which microblogging messages are related to financial market indicators and the mechanism leading to efficient aggregation of information. In particular, this research investigates the information content of stock microblogs with respect to individual stocks and explores the effects of social influences on an interday and intraday basis. We collected more than 1.2 million stock-related messages (so-called tweets) related to S&P 100 companies over a period of 7 months. Using methods from computational linguistics, we went through an elaborated process of message feature reduction, spam detection, language detection, and slang removal, which has led to an increase in classification accuracy for sentiment analysis. We analyzed the data on both a daily and a 15-minute basis and found the sentiment (i.e., bullishness) of messages is associated with daily abnormal stock returns and message volume to predict 15-minute follow up returns, trading volume, and volatility. Notably, the results show that users who provide above average investment advice are given a greater share of voice through higher levels of retweets as well as larger influence. This offers an explanation for the efficient aggregation of information in microblogging platforms. Moreover, the results for the interday analysis provide support for the strengthening of the relationship between quality weighted bullishness and returns. Furthermore, we simulated a set of trading strategies using microblog features and the results suggest that it is possible to exploit market inefficiencies even when fixed transaction costs are included. To our knowledge, this is the first study to comprehensively explore the association between the information content of stock microblogs, in particular, social influences, and intraday market features. The insights from the study permit scholars and professionals to reliably identify stock microblog features, which may serve as valuable proxies for investor behaviour and social influence and assist their decision making.

External Partners

Coolblue

Shop2Market

Yournumber

Timing

This project ran from 2011 until now

Published / Working Papers

·         Li, Ting and Paul Pavlou. 2014. What Drives Users’ Website Registration? The Network Externalities versus Information Privacy Dilemma. Working Paper.

·         Li, Ting, Kauffman, R.J., van Heck, E., Vervest, P., and Dellaert, B. 2014. Consumer Informedness and Firm Information Strategy. Information Systems Research, 25(2), 345-363.

·         Li, Ting, Berens, G., and de Maertelaere, M. 2013/2014. Corporate Twitter Channels: The Impact of Engagement and Informedness on Corporate Reputation. International Journal of Electronic Commerce, 18(2), 97-126.

For more information please contact:

Ting Li

Associate Professor

Tel: + 31 (0)10-408 1961
E-mail: tli@rsm.nl