Summary

Social media platforms have become a common source of information about financial markets. There is a growing academic literature on financial social media—mainly focused on StockTwits, Twitter, Seeking Alpha, and Reddit’s WallStreetBets—and the related areas of social economics and information economics. Social media has been publicly linked to major market events, such as the GameStop short squeeze and the run on Silicon Valley Bank, further intensifying interest in the topic. Two major strands of research on financial social media have emerged: research that uses social media as a lens to examine more general economic behavior and research that directly investigates the effects of social media on financial markets. The social media as a lens approach uses social media platforms to study investor beliefs, investment approaches, and information acquisition that are typically impossible to observe in other data environments. The second strand of social media research investigates social media’s effects on the information environment of financial markets. While most research projects combine these two approaches, they often lean towards one or the other. Studies using social media as a lens have provided insights into questions about how investors update their beliefs, the measurement and consequences of investor disagreement, and even how social networks transmit information. Research on the effects of social media on financial markets has examined whether there is useful information in social media for financial markets, how social media affects information efficiency, and whether social media disseminates incomplete or false information. Many open questions remain, especially as new social media formats emerge.