Social Media Information and Analyst Forecasts

Abstract

We examine whether corporate social media information affects analysts’ forecast accuracy. We use corporate Facebook posts and reactions to such posts to study the information dissemination and information generation role of social media and examine the impact of such on analyst forecast performance. Using aggregate number of posts and reactions to posts for S&P 500 firms, we find that analyst forecast errors are unresponsive to corporate social media posts. However, our results show that analyst forecast errors are decreasing in reactions to such posts. Our analysis separates the information dissemination effect from the information generation effect. Our findings confirm the increasing role of social media as a source of new information and a channel that can improve analysts’ forecast accuracy.