IDEAS home Printed from https://ideas.repec.org/p/lar/wpaper/2022-04.html
   My bibliography  Save this paper

Silence is not golden anymore? Social media activity and stock market valuation in Europe

Author

Listed:
  • Christophe J. GODLEWSKI

    (LaRGE Research Center, Université de Strasbourg)

  • Katarzyna BYRKA-KITA

    (Institute of Economics and Finance, Uniwersytet Szczecinski)

  • Renata GOLA

    (Institute of Economics and Finance, Uniwersytet Szczecinski)

  • Jacek CYPRYJANSKI

    (Institute of Economics and Finance, Uniwersytet Szczecinski)

Abstract

We investigate the link between social media activity and market valuation of listed European companies over the period January 2018 – June 2020. Using a large novel dataset from 39 European capital markets, we first provide a comprehensive “big picture” of social media activity of European listed companies, using data from all European capital markets. Second, we show that greater Twitter activity is associated with increased shareholders’ returns. Third, we find that portfolios with a larger number of tweets posted by a company exhibit larger market risks. Our findings support the idea that investors should consider social media activity when implementing investment strategies.

Suggested Citation

  • Christophe J. GODLEWSKI & Katarzyna BYRKA-KITA & Renata GOLA & Jacek CYPRYJANSKI, 2022. "Silence is not golden anymore? Social media activity and stock market valuation in Europe," Working Papers of LaRGE Research Center 2022-04, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2022-04
    as

    Download full text from publisher

    File URL: http://ifs.u-strasbg.fr/large/publications/2022/2022-04.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bongsug (Kevin) Chae & Eunhye (Olivia) Park, 2018. "Corporate Social Responsibility (CSR): A Survey of Topics and Trends Using Twitter Data and Topic Modeling," Sustainability, MDPI, vol. 10(7), pages 1-20, June.
    2. Yuan, Yu, 2015. "Market-wide attention, trading, and stock returns," Journal of Financial Economics, Elsevier, vol. 116(3), pages 548-564.
    3. Shleifer, Andrei & Summers, Lawrence H, 1990. "The Noise Trader Approach to Finance," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 19-33, Spring.
    4. Rakowski, David & Shirley, Sara, 2020. "What drives the market for exchange-traded notes?," Journal of Banking & Finance, Elsevier, vol. 111(C).
    5. David Rakowski & Sara E. Shirley & Jeffrey R. Stark, 2021. "Twitter activity, investor attention, and the diffusion of information," Financial Management, Financial Management Association International, vol. 50(1), pages 3-46, March.
    6. Chemmanur, Thomas & Yan, An, 2009. "Product market advertising and new equity issues," Journal of Financial Economics, Elsevier, vol. 92(1), pages 40-65, April.
    7. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    8. Mazboudi, Mohamad & Khalil, Samer, 2017. "The attenuation effect of social media: Evidence from acquisitions by large firms," Journal of Financial Stability, Elsevier, vol. 28(C), pages 115-124.
    9. Daniel Andrei & Michael Hasler, 2015. "Investor Attention and Stock Market Volatility," The Review of Financial Studies, Society for Financial Studies, vol. 28(1), pages 33-72.
    10. Brad M. Barber & Terrance Odean, 2008. "All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors," The Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 785-818, April.
    11. Gabriele Ranco & Darko Aleksovski & Guido Caldarelli & Miha Grčar & Igor Mozetič, 2015. "The Effects of Twitter Sentiment on Stock Price Returns," PLOS ONE, Public Library of Science, vol. 10(9), pages 1-21, September.
    12. Matias D. Cattaneo & Richard K. Crump & Max H. Farrell & Ernst Schaumburg, 2020. "Characteristic-Sorted Portfolios: Estimation and Inference," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 531-551, July.
    13. Gustavo Grullon, 2004. "Advertising, Breadth of Ownership, and Liquidity," The Review of Financial Studies, Society for Financial Studies, vol. 17(2), pages 439-461.
    14. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 59-82, Winter.
    15. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Working Papers 111, Princeton University, Department of Economics, Center for Economic Policy Studies..
    16. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Working Papers 111, Princeton University, Department of Economics, Center for Economic Policy Studies..
    17. Seasholes, Mark S. & Wu, Guojun, 2007. "Predictable behavior, profits, and attention," Journal of Empirical Finance, Elsevier, vol. 14(5), pages 590-610, December.
    18. Kewei Hou & Lin Peng & Wei Xiong, 2009. "A Tale of Two Anomalies: The Implication of Investor Attention for Price and Earnings Momentum," Working Papers 2009-4, Princeton University. Economics Department..
    19. repec:pri:cepsud:91malkiel is not listed on IDEAS
    20. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    21. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    22. Aslan, Hadiye & Easley, David & Hvidkjaer, Soeren & O'Hara, Maureen, 2011. "The characteristics of informed trading: Implications for asset pricing," Journal of Empirical Finance, Elsevier, vol. 18(5), pages 782-801.
    23. Turan G. Bali & David Hirshleifer & Lin Peng & Yi Tang, 2021. "Attention, Social Interaction, and Investor Attraction to Lottery Stocks," NBER Working Papers 29543, National Bureau of Economic Research, Inc.
    24. repec:bla:jfinan:v:59:y:2004:i:3:p:1259-1294 is not listed on IDEAS
    25. Al Guindy, Mohamed, 2021. "Corporate Twitter use and cost of equity capital," Journal of Corporate Finance, Elsevier, vol. 68(C).
    26. Eugene F. Fama & Kenneth R. French, 2004. "The Capital Asset Pricing Model: Theory and Evidence," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 25-46, Summer.
    27. Terrance Odean, 1999. "Do Investors Trade Too Much?," American Economic Review, American Economic Association, vol. 89(5), pages 1279-1298, December.
    28. Wu, Chunying & Xiong, Xiong & Gao, Ya & Zhang, Jin, 2022. "Does social media distort price discovery? Evidence from rumor clarifications," Research in International Business and Finance, Elsevier, vol. 62(C).
    29. David Hirshleifer & Sonya Seongyeon Lim & Siew Hong Teoh, 2009. "Driven to Distraction: Extraneous Events and Underreaction to Earnings News," Journal of Finance, American Finance Association, vol. 64(5), pages 2289-2325, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Turan G. Bali & Robert F. Engle & Yi Tang, 2017. "Dynamic Conditional Beta Is Alive and Well in the Cross Section of Daily Stock Returns," Management Science, INFORMS, vol. 63(11), pages 3760-3779, November.
    2. Guomei Tang & Xueyong Zhang, 2021. "Media attention to locations and the cross‐section of stock returns," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2301-2336, April.
    3. Stéphane Goutte & David Guerreiro & Bilel Sanhaji & Sophie Saglio & Julien Chevallier, 2019. "International Financial Markets," Post-Print halshs-02183053, HAL.
    4. Goodell, John W. & Kumar, Satish & Li, Xiao & Pattnaik, Debidutta & Sharma, Anuj, 2022. "Foundations and research clusters in investor attention: Evidence from bibliometric and topic modelling analysis," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 511-529.
    5. Zhibing Li & Jie Liu & Xiaoyu Liu & Chonglin Wu, 2024. "Investor attention and stock price efficiency: Evidence from quasi‐natural experiments in China," Financial Management, Financial Management Association International, vol. 53(1), pages 175-225, March.
    6. Hsieh, Shu-Fan & Chan, Chia-Ying & Wang, Ming-Chun, 2020. "Retail investor attention and herding behavior," Journal of Empirical Finance, Elsevier, vol. 59(C), pages 109-132.
    7. Umar, Tarik, 2022. "Complexity aversion when SeekingAlpha," Journal of Accounting and Economics, Elsevier, vol. 73(2).
    8. Wang, Albert Y. & Young, Michael, 2023. "Mood, attention, and household trading: Evidence from terrorist attacks," Journal of Financial Markets, Elsevier, vol. 66(C).
    9. Michaely, Roni & Rubin, Amir & Vedrashko, Alexander, 2016. "Are Friday announcements special? Overcoming selection bias," Journal of Financial Economics, Elsevier, vol. 122(1), pages 65-85.
    10. Paul Handro & Bogdan Dima, 2024. "Analyzing Financial Markets Efficiency: Insights from a Bibliometric and Content Review," Journal of Financial Studies, Institute of Financial Studies, vol. 16(9), pages 119-175, May.
    11. Qianwei Ying & Tahir Yousaf & Qurat ul Ain & Yasmeen Akhtar & Muhammad Shahid Rasheed, 2019. "Stock Investment and Excess Returns: A Critical Review in the Light of the Efficient Market Hypothesis," JRFM, MDPI, vol. 12(2), pages 1-22, June.
    12. Yung, Kenneth & Nafar, Nadia, 2017. "Investor attention and the expected returns of reits," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 423-439.
    13. Jürgen Huber & Michael Kirchler, 2013. "Corporate campaign contributions and abnormal stock returns after presidential elections," Public Choice, Springer, vol. 156(1), pages 285-307, July.
    14. Bucher, Melk C., 2017. "Investor Attention and Sentiment: Risk or Anomaly?," Working Papers on Finance 1712, University of St. Gallen, School of Finance.
    15. Diefeng Peng & Yulei Rao & Mei Wang, 2016. "Do Top 10 Lists of Daily Stock Returns Attract Investor Attention? Evidence from a Natural Experiment," International Review of Finance, International Review of Finance Ltd., vol. 16(4), pages 565-593, December.
    16. Alan Crane & Kevin Crotty & Tarik Umar, 2023. "Hedge Funds and Public Information Acquisition," Management Science, INFORMS, vol. 69(6), pages 3241-3262, June.
    17. Ahmad, Fawad & Oriani, Raffaele, 2022. "Investor attention, information acquisition, and value premium: A mispricing perspective," International Review of Financial Analysis, Elsevier, vol. 79(C).
    18. Daniel Martin Katz & Michael J Bommarito II & Tyler Soellinger & James Ming Chen, 2015. "Law on the Market? Abnormal Stock Returns and Supreme Court Decision-Making," Papers 1508.05751, arXiv.org, revised May 2017.
    19. González-Sánchez, Mariano, 2022. "Factorial asset pricing models using statistical anomalies," Research in International Business and Finance, Elsevier, vol. 60(C).
    20. Peter C. Dawson, 2015. "The capital asset pricing model in economic perspective," Applied Economics, Taylor & Francis Journals, vol. 47(6), pages 569-598, February.

    More about this item

    Keywords

    stock markets; valuation; CAPM; Twitter; social media; investor attention; information asymmetry; disclosure.;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lar:wpaper:2022-04. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christophe J. Godlewski (email available below). General contact details of provider: https://edirc.repec.org/data/lastrfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.