Social media sentiment and the stock market

Amir Fekrazad (), Syed M. Harun () and Naafey Sardar
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Amir Fekrazad: Texas A&M University-San Antonio
Syed M. Harun: Texas A&M University-San Antonio

Journal of Economics and Finance, 2022, vol. 46, issue 2, No 8, 397-419

Abstract: Abstract This paper investigates the link between social media sentiment and the stock market using more than two million tweets posted in 2017 that include the name or symbol of twenty-five companies listed in the S&P 100. We find a two-way relationship when using hourly and daily intervals: We observe that a higher proportion of negative tweets about a company posted within an hour/day leads to lower returns and a higher short volume for its stock (even after controlling for traditional-media news sentiment). A higher return for a stock in an hour/day leads to less negative sentiment within the next period. However, we are unable to detect a link between the two variables when looking at 15-minute intervals. These results are robust to various specifications and alternative measures of sentiment. Our findings suggest that social media sentiment includes signals beyond those found in traditional media that can impact the stock market. The observed results suggest that these signals are only considered reliable when the sentiment persists over a long enough period.

Keywords: Social media; Stock market; Sentiment; Loughran-McDonald lexicon; Panel regression; C12; G14 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s12197-022-09575-x

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