Tweets and Trades: The Information Content of Stock Microblogs

Tweets and Trades: The Information Content of Stock Microblogs working paper Timm O. Sprenger*, Isabell M. Welpe Technische Universität München TUM School of Management Chair for Strategy and Organization Leopoldstraße 139 80804 Munich Germany December 2010 Acknowledgements: We thank Philipp Sandner and Andranik Tumasjan for helpful comments and suggestions and Philipp Heinemann and Sebastian Peters for their support with the IT implementation for this research. * Corresponding author (timm.sprenger@gmail.com)Electronic copy available at: http://ssrn.com/abstract=1702854 Tweets and Trades: The Information Content of Stock Microblogs Abstract Microblogging forums have become a vibrant online platform to exchange trading ideas and other stock-related information. Using methods from computational linguistics, we analyze roughly 250,000 stock-related microblogging messages, so-called tweets, on a daily basis. We find the sentiment (i.e., bullishness) of tweets to be associated with abnormal stock returns and message volume to predict next-day trading volume. In addition, we analyze the mechanism leading to efficient aggregation of information in microblogging forums. Our results demonstrate that users providing above average investment advice are retweeted (i.e., quoted) more often and have more followers, which amplifies their share of voice in microblogging forums. JEL ...