The causal relationship between social media sentiment and stock return: Experimental evidence from an online message forum

Xinjie Wang*, Zhiqiang Xiang, Weike Xu, Peixuan Yuan

*Corresponding author for this work

Research output: Contribution to journalJournal articlepeer-review

18 Citations (Scopus)

Abstract

This paper examines the impact of sentiment in an online message forum on stock returns. Using a novel controlled experiment, we collect a large panel of messages with no fundamental information but strong sentiment and stock return data. We find a significant causal effect of social media sentiment on the same-day stock returns. The sentiment has no significant effects on stock returns on subsequent days. This effect is mainly driven by messages with positive sentiment, which has a strong positive impact on stock returns. Our results establish a causal relationship between social media sentiment and stock returns and highlight the risk of market manipulation via social media.
Original languageEnglish
Article number110598
Number of pages6
JournalEconomics Letters
Volume216
DOIs
Publication statusPublished - Jul 2022

Scopus Subject Areas

  • Finance
  • Economics and Econometrics

User-Defined Keywords

  • Sentiment
  • Online message board
  • Stock return

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