The Impact of Social Media Text Tone on Stock Prices: Evidence from SeekingAlpha.Com

What is it about?

This paper investigates whether social media text tone impacts financial markets. I collect data from SeekingAlpha.com. I find that social media text tone positively correlates with stock return. User-level analyses indicate that the effect on return is more significant if a user is an influencer, which I define as a person who has many followers and has the power to influence many people through social media, and if the user is more senior, which I define as having extended access to social media platforms. Content analyses indicate that the length of articles negatively correlates with market returns. Additionally, investors overreact to information on social media, and a reversal pattern is observed in the long run. Overall, tone and market returns positively correlate in the short period, but in the long term, it has a reversal.

Featured Image