Measuring the Real-Time Stock Market Impact of Firm-Generated Content

Abstract

Firms increasingly follow an ‘always on’ philosophy, producing multiple pieces of firm-generated content (FGC) throughout the day. Current methodologies used in marketing are unsuited to unbiasedly capturing the impact of FGC disseminated intermittently throughout the day in stock markets characterized by ultra-high frequency trading. They also neither distinguish between the permanent (i.e. long-term) and temporary (i.e. short-term) price impacts nor identify FGC attributes capable of generating these price impacts. In this study, the authors define price impact as the impact on the variance of stock price. Employing a market microstructure approach to exploit the variance of high frequency changes in stock price the authors estimate the permanent and temporary price impacts of the firm-generated Twitter content of S&P 500 IT firms. The authors find that firm-generated tweets induce both permanent and temporary price impacts, which are linked to tweet attributes; valence and subject matter. Tweets reflecting only valence or subject matter concerning consumer or competitor orientation result in temporary price impacts, while those embodying both attributes generate permanent price impact; negative valence tweets about competitors generate the largest permanent price impacts. Building on these findings, the authors offer suggestions to marketing managers on the design of intraday FGC.

The many faces of social media in business and economics research: Taking stock of the literature and looking into the future

“…Information posted by firms and firm executives as an information signal . Fewer studies focus on the effects of firms’ and firm executives’ social media activity on financial market outcomes (e.g., Al Guindy, 2021; Cao et al., 2021; Chung et al., 2020; Feng & Johansson, 2019; Kim & Youm, 2017; Lacka et al., 2022). Overall, these studies document significant relationships between firm‐generated content and financial market indicators.…”

“…Interestingly, Tweets comprising both valence (positive or negative) and subject matter information regarding consumer or competitor orientation had permanent price impacts, with negative‐valence Tweets regarding competitors having the largest permanent price impact. In contrast, Tweets comprising only one type of information exhibited only temporary price information (Lacka et al., 2022).…”

“…Overall, these studies document significant relationships between firmgenerated content and financial market indicators. For example, Lacka et al (2022) demonstrate that firm-generated Twitter content impacts stock prices in the context of S&P 500 information technology firms. Interestingly, Tweets comprising both valence (positive or negative) and subject matter information regarding consumer or competitor orientation had permanent price impacts, with negative-valence Tweets regarding competitors having the largest permanent price impact.…”

Peer effects on brand activism: evidence from brand and user chatter on Twitter

“…This article also builds upon existing literature on brand activism. For example, much of the literature on brand activism assesses the consequences of political engagement, such as financial returns, market performance, or consumers’ attitudes toward the brand (Hadani and Schuler 2013 ; Lacka et al 2021 ; Bhagwat et al 2020 ; Dodd and Supa 2015 , etc.). Other research on the consequences of brand activism focuses on the characteristics of the activism itself, such as its perceived authenticity (Sobande 2019 ; Vredenburg et al 2020 ; Mukherjee and Althuizen 2020 ; Sibai et al 2021 ).…”

“…Much of the literature focuses on the consequences of brand activism. Some examine the impact on market performance (Hadani and Schuler 2013 ; Fossen and Schweidel 2019 ; Lacka et al 2021 , etc.). Other research examines the direct consequences of brand activism on purchase (Dodd and Supa 2015 ; Hydock et al 2019 , etc.…”