The Value of Free Content on Social Media: Evidence from Equity Research Platforms.

The effect of social media sentiments on stock market returns is well-established. However, the quality of content and expertise of content creators vary on social media platforms, and the stocks vary in characteristics. In this research, we examine the effect of sentiment expressed in free content from a social media platform on stock abnormal returns. We also examine the moderating effect of the market capitalisation of stocks on the strength of this relationship. Using data collected from a well-known equity research platform, we demonstrate that the size of the market cap plays an important role in this relationship. The smaller the market cap, the higher the predicting power of the social media sentiment on stock abnormal returns. Considering different holding periods from 1 month to 1 year, we show that sentiments from social media have a long wear in effect on stock abnormal returns. Our results shed light on the importance of market cap and holding period when studying the effect of social media sentiments on stock market returns.