Viral but Vanishing: Investment Advisors, Social Media, and Regulation

Nazanin Babolmorad, Peter Bossaerts and Nadia Massoud

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Over 60% of younger retail investors rely on social media platforms like StockTwits for trading insights, displacing traditional investment advice and creating a new form of financial disintermediation. This paper provides a novel contribution by examining how investment advice diffuses through financial social networks and how professionals navigate these platforms in an attempt to avoid disintermediation. Using StockTwits data, we identify users whose messages go viral, so-called effective influencers, and assess how network structure and message content shape influence. We find that professionals strategically assert dominance, being 366% more likely than regular users to post viral messages, while avoiding partisan or emotionally charged content. Despite this influence, their activity declined sharply after 2018. We show that this decline was caused by intensified SEC and FINRA oversight. Unlike historical patterns - where regulatory reforms typically prompt gradual behavioral change if there is a change at all - the StockTwits case reveals a strong and immediate regulatory impact. Overall, the findings suggest that regulation rather than platform design or user behavior caused disintermediation in investment advice, with important consequences for how retail investors access and interpret financial advice.

Keywords: Financial Social Networks; Retail Investors; Social Influence; Investment Advisors; Disintermediation of Investment Advice; Government Policy and Regulatory Over-reach (search for similar items in EconPapers)
JEL-codes: D91 G23 G28 G50 (search for similar items in EconPapers)
Date: 2025-11-21
New Economics Papers: this item is included in nep-pay and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econ.cam.ac.uk/sites/default/files/pub ... pe-pdfs/cwpe2576.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:2576

Access Statistics for this paper

More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
Bibliographic data for series maintained by Jake Dyer ().