Weibo vs Wall Street Journal: How are Social & Mass Media Different in the Stock Market?

Abstract

While investors in financial markets have access to information from both mass media and social media, trading platforms that curate and provide this information have little to go by in terms of understanding their relative value. This research note compares social media with mass media in the stock market from the lenses of information diversity and value in predicting future stock returns. Using nearly a million stock-related news articles and 12.7 million stock-related social media messages from Sina’s Finance news platform and the popular Weibo platform in China for the year of 2014, we find that in the stock market the information coverage of social media is less diverse than that of mass media, a finding that gets exacerbated with increasing volume of media information. In the short-term (one to five days) we show that both types of content have predictive value but are relevant in different time horizons. Our empirical evidence suggests that social media and mass media serve stock market investors differently and have significant practical implications for the design of trading platforms and for future research.