Keywords

social media analyst, sell-side analyst, information intermediaries, equity research

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 the analyst research is preceded by the report of an SMA, and that this is particularly true of 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 that is similar to but arrives earlier than sell-side equity research, and speak to the connected and evolving roles of information intermediaries in capital markets.

Original Publication 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

Document Type

Peer-Reviewed Article

Publication Date

2022

Publisher

Review of Accounting Studies

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Full Professor

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