To the Moon: Analyzing Collective Trading Events on the Wings of Sentiment Analysis

TL;DR

This study analyzes how Twitter activity and sentiment relate to stock volatility driven by retail investors, finding Twitter activity correlates with volatility but sentiment has limited impact, contrasting with Reddit's influence.

Contribution

It extends previous research by analyzing Twitter's role in social media-driven stock events, providing new insights into platform-specific influences on market volatility.

Findings

Twitter activity correlates with stock volatility

Tweet sentiment has limited impact on stock performance

Reddit remains more influential than Twitter in these events

Abstract

This research investigates the growing trend of retail investors participating in certain stocks by organizing themselves on social media platforms, particularly Reddit. Previous studies have highlighted a notable association between Reddit activity and the volatility of affected stocks. This study seeks to expand the analysis to Twitter, which is among the most impactful social media platforms. To achieve this, we collected relevant tweets and analyzed their sentiment to explore the correlation between Twitter activity, sentiment, and stock volatility. The results reveal a significant relationship between Twitter activity and stock volatility but a weak link between tweet sentiment and stock performance. In general, Twitter activity and sentiment appear to play a less critical role in these events than Reddit activity. These findings offer new theoretical insights into the impact of social media platforms on stock market dynamics, and they may practically assist investors and regulators in comprehending these phenomena better.