Social Media Sentiment in International Stock Returns and Trading Activity

By Selin Duz Tan, Oktay Tas. Journal of Behavorial Finance, 2020

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Abstract The authors investigate the impact of social media on S&P index constituents for U.S., European, and emerging markets with the international investor perspective using firm-specific Twitter sentiment and activity. The findings indicate that Twitter activity and sentiment are associated with trading volume and returns, and predicts subsequent-day trading volume. The authors find that firm-specific Twitter sentiment contains information for predicting stock returns and this predictive power remains significant after controlling news sentiment. The positive tone of Twitter sentiment is more pronounced in small and emerging market firms, which is consistent with the literature stating that small firms are hard to value and emerging market firms contain high information asymmetry. From a practical perspective, investors could potentially use social media sentiment in trading strategies.

Subfields: Economics and Econometrics, Finance, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/fcf56cf3c2bab90e0af2c0cc004ecdf3e92c8c83