Impact of Social Media on the Stock Market: Evidence from Tweets

  • Vojtěch Fiala Department of Finance, Faculty of Business and Economics, Mendel university in Brno, Zemědělská 1, 613 00 Brno, Czech Republic, e-mail: fialavojtech1@gmail.com
  • Svatopluk Kapounek Department of Finance, Faculty of Business and Economics, Mendel university in Brno, Zemědělská 1, 613 00 Brno
  • Ondřej Veselý Faculty of Business and Economics, Mendel university in Brno, Zemědělská 1, 613 00 Brno
Keywords: stock returns, Granger causality, text mining, sentiment analysis, CAPM

Abstract

The paper deals with the impact of the economic agent sentiment on the return for Apple and Microsoft stocks. We employed text mining procedures to analyze Twitter messages with either negative or positive sentiment towards the chosen stock titles. Those sentiments were identified by developed algorithms which are capable of identifying sentiment towards companies and also counting the numbers of tweets in the same group. This resulted in counts of tweets with positive and negative sentiment. Then we ran analysis in order to find causality between sentiment levels and the stock price of companies. To identify causal effects we applied Granger causality tests. We found bilateral causality between the risk premium and the amount of news distributed by Twitter messages.

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Published
2015-11-11
Section
Articles