The Tone of Market Participants' Opinions via Social Media and Capital Market Reaction

The present study intends to test and analyze the tone of market participants' opinions via social media and capital market reaction. We use a sample of 345 firm data from the list of S&P 500 firms and analyze it using Stata software. The results showed no significant relationship between the tone of earnings tweets and market variables. However, the results of separating the tweets into the original earnings tweets and existing earnings tweets indicated a significant relationship between the tone of the initial earnings tweets and abnormal share turnover. Findings also suggest a significant relationship exists between the tone of existing earnings tweets and bid-ask spreads. Further analysis based on separating tweets into positive and negative demonstrated a meaningful relationship between the tone of positive and negative tweets and abnormal stock turnover and spreads. The results confirm that Twitter can provide complementary awareness in capital markets.