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They write: “Our study shows that by carefully incorporating attributes, such as valence and subject matter, marketing managers can design social media content to generate varying degrees of permanent or temporary impact.”įirms should make sure their tweets include both valence and subject matter if their aim is to improve the informativeness of their stocks with respect to firm value, say the researchers. However, when, for example, tweet valence is set in the context of a specific subject (e.g., customer or competitor), it, on average, offers valid information that can be acted on by investors.” “When social media posts contain what could be referred to as ‘partial information’ – only valence or subject matter – they lack the context that allows investors to make inferences about firm value. That’s something marketing managers need to keep in mind when planning social media posts and campaigns, say the researchers. Investors in financial marketers are paying attention to firm-generated social media content and their ability to act on information at sub-second levels allows for instantaneous incorporation of social media content.Īlgorithmic traders, or “algos,” can scour a myriad of sources, including social media content, for information and act on it in milliseconds. It should upend the way companies plan their social media posts throughout the day because “valence as a singular attribute is associated with decreasing permanent price impact,” they write. This is a crucial finding for marketers, say the researchers. “The average negative and positive valence tweet when viewed through the lens of consumer or competitor orientation generates a permanent price impact, while a competitor-oriented tweet with a negative valence is likely to have the highest permanent price impact.” “Our results show the importance of interaction effects between tweet valence and subject matter in generating permanent price impact,” write the researchers. They found similar results for tweets that only reflected a consumer or competitor orientation, but the impacts were smaller. That’s because temporary jumps and dips in stock prices can signal uncertainty about a firm, which can increase transaction costs for investors and can lead to increases in the cost of capital for the firms themselves. It’s good for firms when tweets create permanent price impact, but temporary price impact is undesirable – and potentially negative – say the researchers. They show that tweets with positive or negative sentiment were consistently linked with a reduction in permanent price impact and an increase in temporary price impact, as measured by the variance in stock price. They find that two things matter in tweet content: sentiment and subject matter.
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The researchers looked at the content firms were posting on Twitter to see what types of tweets had the biggest impact on stock prices. Their findings have big implications for firms’ social media marketing teams. They point to data that 92% of firms use their Twitter accounts more than once a day, with 42% of those tweeting up to five times a day, and 19% tweeting six to 10 times a day. The researchers honed in on Twitter because of the “always-on” nature of the social media platform. They focused on Twitter, combing through tweets from a sample of S&P 500 IT firms and ultra-high frequency trading data to see how a firm’s tweets impacted its stock price in real-time. Eric Boyd of the University of Central Florida. Kannan shows how a firm’s social media posts have big impacts on its stock price, both temporarily and permanently.įor the paper in the Journal of Marketing, Kannan, associate dean for strategic initiatives and Dean’s Chair in Marketing Science, worked with Ewelina Lacka and Gbenga Ibikunle of the University of Edinburgh and D.