{"id":30437,"date":"2023-12-01T12:24:16","date_gmt":"2023-12-01T11:24:16","guid":{"rendered":"https:\/\/quantpedia.com\/?p=30437"},"modified":"2025-06-04T14:32:52","modified_gmt":"2025-06-04T12:32:52","slug":"what-can-we-extract-from-the-financial-influencers-advice","status":"publish","type":"post","link":"https:\/\/vvv.quantpedia.com\/es\/what-can-we-extract-from-the-financial-influencers-advice\/","title":{"rendered":"What Can We Extract From the Financial Influencers’ Advice?"},"content":{"rendered":"\n

Social media<\/a> are often the main and primary choice of information in almost every area of our lives, and they also influence the financial decisions of retail traders and investors. A lot of people give opinions anywhere on the Internet; some are respected, others are disrespected, some are more well-known, and others obscure. But the power of those people, financial influencers, as a group, is substantial as they create the market sentiment. But what’s the real value of their advice? Can we extract useful information from their opinions?<\/strong><\/p>\n\n\n\n

Swiss Finance Institute Research Paper Series<\/em>, with the plain name Finfluencers<\/a>, touches on this topic. The answer to the important question of whether competition among users of social media platforms is such that followers can easily identify skilled and drive out unskilled finfluencers from the market for social information is, unfortunately, no. <\/strong>However, a few interesting tidbits result even in a profitable strategy built upon some findings.<\/p>\n\n\n\n

Social media users tend to follow unskilled and antiskilled finfluencers, defined as finfluencers whose tweets generate negative alpha. Antiskilled influencers often achieve the same return and social sentiment momentum, which coincides with the behavioral biases of retail investors who trade on antiskilled finfluencers\u2019 flawed advice. These results are consistent with homophily (“love of sameness,” which is a sociological theory that similar individuals will move toward each other and act in a similar manner), <\/strong>also seen in other social networks and groups, <\/strong>in this case often resulting in the survival of un- and antiskilled finfluencers even though they do not provide valuable investment advice.<\/strong><\/p>\n\n\n\n

One of the profitable applications and proposed strategies is contrarian<\/strong> investing based on going against advice from the tweets by antiskilled influencers, which yields abnormal out-of-sample returns, <\/strong>funnily called by authors \u201cwisdom of the antiskilled crowd.\u201d <\/strong>All in all, these findings shed light on the quality of finfluencers\u2019 unsolicited financial advice and the competition among and economic incentives faced by finfluencers which the SEC has been concerned about.<\/strong><\/p>\n\n\n\n

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