Social Media Analysts and Sell-Side Analyst Research

48 Pages Posted: 20 Sep 2019 Last revised: 6 Sep 2021

See all articles by Michael S. Drake

Michael S. Drake

Brigham Young University - Marriott School

James Moon

Georgia Institute of Technology - Scheller College of Business

Brady J. Twedt

University of Oregon - Lundquist College of Business

James Warren

University of Connecticut

Multiple version iconThere are 2 versions of this paper

Date Written: June 7, 2021

Abstract

We examine how research posted by “social media analysts” (SMAs), individuals posting equity research online via social media investment platforms, is related to research subsequently produced by professional sell-side equity analysts. Using data from Seeking Alpha, we find that the market reaction to sell-side analyst research is substantially reduced when preceded by the report of an SMA, and this is particularly true for sell-side analysts’ earnings forecasts. We further find that this effect is more pronounced when SMA reports contain more decision-useful language, are produced by SMAs with greater expertise, and relate to firms with greater retail investor ownership. We also provide evidence that the attenuated response to sell-side research is most likely explained by SMA research preempting information in sell-side research and that analysts respond to SMA preemption with bolder and more disaggregated forecasts. Collectively, our results suggest that equity research posted online by SMAs provides investors with information similar to but earlier than sell-side equity research and speak to the connected and evolving roles of information intermediaries in capital markets.

Keywords: equity research, analysts, social media

JEL Classification: G12, G14, G24

Suggested Citation

Drake, Michael S. and Moon, James and Twedt, Brady J. and Warren, James, Social Media Analysts and Sell-Side Analyst Research (June 7, 2021). Available at SSRN: https://ssrn.com/abstract=3456801 or http://dx.doi.org/10.2139/ssrn.3456801

Michael S. Drake

Brigham Young University - Marriott School ( email )

United States

James Moon (Contact Author)

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Brady J. Twedt

University of Oregon - Lundquist College of Business ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

James Warren

University of Connecticut ( email )

2100 Hillside Rd
Storrs, CT 06269
United States

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