“Wisdom of Crowds: Is Nonfinancial Information Disseminated on Twitter Informative about Future Fundamentals?” by Dr. Vicki Wei TANG
Dr. Vicki Wei TANG
Assistant Professor in Accounting
McDonough School of Business
This study examines whether third-party-generated nonfinancial information on Twitter is informative, and if so, whether analysts incorporate this collective wisdom. Empirical results indicate that third-party-generated product tweets on social media, when summarized, are informative about upcoming sales incremental to financial information. First, ceteris paribus, sales growth for the upcoming year increases with the valence and volume of tweets about a company’s products and brands disseminated on Twitter. Second, the predictive power of such information with respect to upcoming sales is more pronounced when there is limited product information publicly available from other sources. However, professionals in the capital markets, such as analysts, do not fully incorporate the implications for upcoming sales of the collective wisdom on Twitter. Analysts do not revise their forecasts of sales in response to the change in such information and thus consistently underreact to the valence and volume of nonfinancial information disseminated on Twitter.