Decision Support Systems 55 (2013) 919926

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Decision Support Systems

journal homepage: www.elsevier.com/locate/dss

The impact of social and conventional media on rm equity value:

A sentiment analysis approach
Yang Yu a, Wenjing Duan b,, Qing Cao a
a
Texas Tech University, United States
b
The George Washington University, United States

a r t i c l e i n f o a b s t r a c t

Available online 30 December 2012 This study aims to investigate the effect of social media and conventional media, their relative importance, and
their interrelatedness on short term rm stock market performances. We use a novel and large-scale dataset
Keywords: that features daily media content across various conventional media and social media outlets for 824 public traded
Sentiment analysis rms across 6 industries. Social media outlets include blogs, forums, and Twitter. Conventional media includes
Social media major newspapers, television broadcasting companies, and business magazines. We apply the advanced senti-
Conventional media
ment analysis technique that goes beyond the number of mentions (counts) to analyze the overall sentiment of
Firm equity value
each media resource toward a specic company on the daily basis. We use stock return and risk as the indicators
of companies' short-term performances. Our ndings suggest that overall social media has a stronger relationship
with rm stock performance than conventional media while social and conventional media have a strong interac-
tion effect on stock performance. More interestingly, we nd that the impact of different types of social media
varies signicantly. Different types of social media also interrelate with conventional media to inuence stock
movement in various directions and degrees. Our study is among the rst to examine the effect of multiple sources
of social media along with the effect of conventional media and to investigate their relative importance and their
interrelatedness. Our ndings suggest the importance for rms to differentiate and leverage the unique impact of
various sources of media outlets in implementing their social media marketing strategies.
2012 Elsevier B.V. All rights reserved.

1. Introduction and quantifying the overwhelmingly large amount and unstructured

The Internet has enabled an increasing amount of user-generated
content (UGC) that potentially becomes the primary source of informa-
tion for both consumers and businesses. The past decade has witnessed
a dramatic change of the media landscape with digital social media
channels (e.g., blogs, online forums, and social networking sites) for
word-of-mouth (WOM) supplementing traditional media channels
(e.g., newspapers, television, and magazines). The rise of UGC on the In-
ternet has fueled a fast-growing market in personal opinions [1]. More
and more businesses and top executives are recognizing social media
as an incredibly rich vein for gaining a better understanding of the online
discussions and market opportunities, and for gaining feedback and eval-
uations of their own and their competitors' products and performances,
the market structure, and the overall competitive landscape [27,40].
With the increasing availability of social media data sources, the re-
cent years have seen an emergence of academic and industrial research
that taps into these data sources. However, the utilization of these
data sources remains in an early stage and outcomes are often mixed
[17,27]. The major challenges are the inherent difculties of tracking
Corresponding author.
E-mail addresses: yang.yu@ttu.edu (Y. Yu), wduan@gwu.edu (W. Duan),
qing.cao@ttu.edu (Q. Cao).
set of data. A large body of extant research uses the quantitative
summaries of UGC, such as overall valence and volume of user review
ratings, to represent the users' opinions [6,810,16,24]. However, recent
research suggests that it is important to extract the multifaceted textual
content in UGC, which highlights the need to delve deeper into the con-
tent of the online discussions [1,13,35]. In addition, the vast majority of
previous studies focus purely on the effect of online UGC and social
media, without considering their interactions with conventional medial
sources [37].
In this study, we aim to investigate the effect of social media and con-
ventional media, their relative importance, and their interrelatedness on
rm performances. Our choice of stock market performance as the out-
come variable has the following benets. First, stock market perfor-
mance measures the shareholder value, and is the ultimate concern of
the company, which has been increasingly used in Marketing and IS
studies [5,25,36]. Second, in contrast to sales and prots data, which
are not easily available at a daily level, stock market performance is read-
ily available at this level, allowing for more granular analysis. Third, social
media content is updated rapidly and spreads virally, which can provide
the real-time rst-hand information to the investor. Thus social media
can provide the timely evaluation of rms' performance, which allow
the investors not only to follow consumers' sentiment but also to predict
their future business values [25].

0167-9236/$ see front matter 2012 Elsevier B.V. All rights reserved.
http://dx.doi.org/10.1016/j.dss.2012.12.028
920 Y. Yu et al. / Decision Support Systems 55 (2013) 919926
We use a novel and large-scale dataset that features daily media
content across various conventional media and social media outlets
for 824 public traded rms across 6 industries. To properly capture
both longitudinal and cross-sectional properties of our data set, we
apply xed-effects panel data estimators. There are several important
differences between the current paper and previous studies. First, un-
like most of the previous studies, our research focuses not on product
reviews and ratings, but on less structured media content. Second, we
apply more advanced sentiment analysis technique that go beyond
the number of mentions (counts) and the simple and discrete classi-
cation of positive and negative for media discussion. Third, we ex-
tract and analyze the overall sentiment toward a specic rm on a
daily basis for a large range of rms across various industries, where-
as most of the earlier studies focus either on one product, one rm, or
one site. Fourth, we are among the rst to examine the effect of mul-
tiple sources of social media along with the effect of conventional
media, investigate their relative importance and their interrelated-
ness. Fifth, the panel data we use in this study are particularly bene-
cial in media research as they not only allow us to study the inter-
temporal behavior and performance of rms, but they also enable
us to control for the unobserved rm-level heterogeneity and seasonal
factors [20].
The paper proceeds as follows. Related work is reviewed and dis-
cussed to provide the theoretical background and foundation for our
study in Section 2. We then describe the data, measurement, and provide
detailed discussion on sentiment analysis procedures in Section 3. In
Section 4, we formulate the econometrics models and present the esti-
mation results. Finally, we conclude the paper by discussing study impli-
cations and suggesting future research directions.
2. Literature review
While the number and types of information resources continue
to grow exponentially, human beings start to face the difculty of
transforming the wealth of information to knowledge for more effective
use [3]. Especially, social media has been exploded as a category of on-
line discourse where people create content, share and discuss in com-
munication network. Social media is changing people's way of life
dramatically because of its high speed connections, ease of use and
great credibility. From a business and marketing perspective, we notice
that the media landscape has dramatically changed in the recent years,
with traditional media (e.g., newspapers, magazines, and television)
now supplemented or replaced by social media (e.g., blogs, microblogs,
and online forums). In contrast to content provided by traditional
media sources, social media content tend to be more human being
oriented. For example, in a blog post, an author argues against the tradi-
tional source news from her perspective and readers can join the dis-
cussion and propose their own views freely. Despite author or social
group bias, such content is still often considered to be more credible
and trustworthy by people than traditional sources of information [2].
With an increasing amount of user-generated content (UGC) on the
social media, more and more businesses and top executives are recog-
nizing social media as an incredibly rich vein for gaining a better under-
standing of the online discussion and market opportunities, and for
gaining feedback and evaluations of their own and their competitors'
products and performances, the market structure and the overall com-
petitive landscape [27,40].
The object of an information system is bridging the gap between the
continuous growing information and effectively converting information
into knowledge. As for information processing capabilities, the chal-
lenges of a current information system are two-fold: sufcient accuracy
and high efciency. Narrowing this down to UGC research, the major
challenges are the difculties to track and quantify the overwhelmingly
large amount and unstructured set of data. Recent years have seen an
emergence of academic and industrial research that taps into UGC. A
large body of extant research uses the quantitative summaries of UGC,
such as overall valence and volume of user review ratings, to represent
the users' opinions [6,810,16]. However, the utilization of these data
sources still remains in an early stage and outcomes are often mixed
[17,27]. To the best of our knowledge, most of previous studies have
only used the numeric data such as count or number of stars, without
incorporating semantic information contained in the text. Recent re-
search suggests that it is important to extract the multifaceted textual
content in UGC, which highlights the need to delve deeper into the con-
tent of the online discussions [1,13,35]. In addition, it is still not well un-
derstood with respect to the relative impacts of different media types
on marketing performance (e.g., sales), and how marketing perfor-
mance inuences word of mouth (WOM). Furthermore, the vast major-
ity of previous studies focus purely on the effect of online UGC and
social media, without considering their interactions with conventional
media sources [37].
New research applying text-mining (TM) and natural language pro-
cessing (NLP) techniques was developed to help people nd business
intelligence from free-form data; however, these methods lack strength
in detecting people's opinion [15]. In the past decades, both industry
and academia have been trying to nd effective methods and tools to
extract opinion-oriented information automatically from unstructured
data [31]. Sentiment analysis (SA) has evolved from TM and NLP, but
aims to determine the sentiment of a speaker or a writer with respect
to some specic topics [23]. More recently, SA has greatly assisted deci-
sion makers in extracting opinions from unstructured human-authored
documents [31], which can be applied in various areas. It reduces the
need for reading huge amount of documents to extract business opin-
ions on a variety of topics. There are three main reasons to choose SA
as a research approach. 1) It converts large unstructured content into
a form that allows for specic predictions about particular outcomes,
without institute market mechanisms. 2) It builds models to aggregate
the opinions of the collective population and gains useful insights into
group behavior to predict future trends. 3) It applies gathered informa-
tion on how people react to particular objects and then design market-
ing and advertising campaigns.
Existing SA approaches are either based on linguistic resources or
machine learning. SA based on linguistic resources is centered on
predetermined lists of positive and negative words. The polarity of lan-
guage depends on the frequency of different types of words appearing
in the document. However, this approach involves a number of linguis-
tic techniques that are not always robust and are often quite labor in-
tensive [34]. The other machine learning based approach relies on a
computer's ability to automatically learn the language used for express-
ing sentiment regardless of how good or normal the language is.
However, the computer needs to have some information to learn from
(called a training corpus or documents) and the more documents the
computer learns the better. In the case of SA, the training corpus is
always a set of example documents annotated by humans. Once the
computer has learned from the examples, it can apply the acquired
knowledge to new documents (a holdout corpus) and then classify
them into sentiment categories.
There are two main streams of research in SA domain. One stream
has focused on sentiment polarity and the other has focused on features
detection. Most of previous SA research focuses on UGC such as product
reviews or online comments. Also, we notice that most of the prior
works prefer to explore the performance of a single product only.
Gruhl et al. [18] show how to predict spikes in book sales via analyzing
the correlation between blog and review mentions and performance.
Joshi et al. [19] mine on text and metadata features to predict the earn-
ing of movies. In addition, signicant progress has been made in senti-
ment tracking techniques that extract indicators of public mood
directly from social media content such as blog content and in particular
large-scale Twitter feeds [14,24,26,29]. In this research, we extract sen-
timent signals from both conventional and social media and calculate
the sentiment polarity of each document for different rms based on
SA techniques.
 Y. Yu et al. / Decision Support Systems 55 (2013) 919926
3. Data, measures, and sentiment analysis
3.1. Conventional media and social media data
We randomly select 824 companies and create a unique dataset.
As shown in Table 1, this dataset covers six industries including
pharmaceutical, retail, software, savings institutions, health care,
and hotel. Table 1 shows the summary of the 824 companies.
We obtain the nancial-statement and nancial-market data for
the 824 companies from COMPUSTAT and the Center of Research in
Security Prices (CRSP) that was recorded from July 1st to September
30th, 2011. We use these data to construct measures of abnormal
returns and cumulative abnormal returns (please see more discussion
in the next section). Subsequently, we obtained a collection of blog,
forum, news and micro blog (e.g., Twitter) content for those three
months (from 2011/07/01 to 2011/09/30) related to the 824 companies
(Table 2). A web crawler was created to download blogs, forums, and
news web pages automatically. Due to the large variety of data source,
the web pages have different layouts, different formatting markups,
and different hidden advertisements. As such it is the main challenge
for automatic text extraction, and a customized HTML parser based on
Python was designed and imported as a noise lter to remove the ir-
relevant information such as sidebars, advertisements, header, footer,
and then to identify useful and clean text paragraphs from large chunks
of HTML code. The underlying mechanism of this lter is rather simple,
which is to use information about the density of text vs. HTML tags to
gure out if a line of text is worth outputting. Different with a common
html parser, the main advantage of this lter is that it can be applied to
an arbitrary html code regardless of the page layout or the noise tags
used. For each blog post, forum post, and news article, we obtained
the title, date, author, source domain, and the main content. For each
Tweet, we obtain Twitter username, the datetime of the submission
(GMT+ 0), submission type (Tweet or Retweet), and the text content
of Tweet which is by design limited to 140 characters. In order to
avoid spam messages and other advertising tweets, we lter tweets
that include URLs only. Table 2 summarizes the four media data
resources.
We employ an automated SA technique to explore the sentence-level
sentiment polarity and to obtain a sentiment measure for each compa-
ny in a given day. The detail of such SA analysis will be discussed in
Section 3.2. The sentiment matrix is then derived to show sentiment
from each media source (a score from 1 to 1), a score of 1 (1)
means this media source has the most positive (negative) view for the
company. For example, in a given day, a company may have a score of
0.8 from the conventional news and a score of 0.3 from the social
media, which would imply that traditional media has more positive
sentiment towards the company than social media does.
For one document d, either a blog or a forum post, the overall sen-
timent score is calculated by the following formula:
Npd Nnd
Sd
Npd Nnd
Table 1
Summary of company characteristics.
Industry
Pharmaceutical preparation manufacturing
Retail trade
Software publishers
Savings institutions
Accommodation and food services, travel arrangement
and reservation services and tour operators
Health care and social assistance, direct health and
medical insurance carriers
Total
921
where Npd denotes the number of positive sentences in document d and
Npd denotes the number of negative sentences in document d. Previous
studies use ternary classication to represent sentiment polarity, positive,
negative, and neutral [30]. We only use positive and negative labels in this
study due to two main reasons. The rst reason is that a sentence that in-
cludes subjective expressions always implies either positive or negative
feelings. Neutral has a fairly vague range, which is much less accurate to
identify. The second consideration is from the methodological (e.g., ma-
chine learning) perspective. There are no mature sentiment repertoires
yet available to efciently and accurately identify neutral sentiment.
One routine step in SA is to train the machine to allows computers to
evolve behaviors based on empirical data such as an external knowl-
edge repository. In our procedure, we train the sentiment classication
system by the Cornell movie-review dataset 1. We then compute the ac-
curacy of the classier on the test set and use the F-measure to evaluate
the performance based on precision and recall.
The F-measure is calculated as:
2  Precision  Recall
F  measure 2
Precision Recall
where
Precision TP=TP FP and Recall TP=TP FN: 3
In Eq. (3), TP is the number of true positive, TN is the number of
true negatives, FP is the number of false positives, and FN is the num-
ber of false negatives.
The proposed positivenegative classication algorithm can auto-
matically classify polarity with 79% accuracy and 0.86 F-measure on
the test set. On average, accuracy of binary sentiment classication is
around 80% [4].
3.2. Sentiment analysis
We employ an automated sentiment analysis technique to explore
the document-level polarity and to gain a sentiment score for the
company in a given day. Sentiment analysis is the computational de-
tection and study of opinions, sentiments, emotions, and subjectiv-
ities in text [22,23,30].
To accomplish the goal of mining opinions, the sentiment analy-
sis involves two consecutive tasks: detecting which text segments
(e.g., sentences) contain sentiment signals, and determining the polar-
ity and even the strength of that sentiment [30]. Thus, the main purpose
of SA is to determine the sentiment of a speaker or a writer on specic
topics. The use of sentiment analysis and related approaches has gained
great popularity in the past decade due to several factors, including the
advance of machine learning methods in natural language processing
and information retrieval, the availability of large and rich datasets for
machine learning algorithms to be trained on, and the development of
many commercial intelligence applications [7,30,38,39].
In this study, we apply the Nave Bayes (NB) algorithm to conduct
1 sentiment analysis. NB is a simple but effective classier that has been
used in numerous information processing techniques such as image
recognition, NLP, information retrieval, etc., based on the open-source
Natural Language Toolkit (NLTK) [11,21,28,32].
The underlying theorem for Nave Bayesian text classication is
N
the Bayes Rule:
156 P BjA  P A
190 PAjB : 4
P B
155
146
82 The Bayes Rule enables the calculation of the likelihood of event A
given that B has happened. This is used in text classication to determine
95
1
Polarity dataset v2.0 URL: http://www.cs.cornell.edu/people/pabo/movie-review-
824
data/.
922 Y. Yu et al. / Decision Support Systems 55 (2013) 919926

Table 2
Four types of media data.

Content Data source Data source description # of

category content

Blog Google Blogs Google Blog Search provides fresh, relevant search results from millions of feed-enabled blogs. Users can search for blogs or blog 11,369
posts, and can narrow their searches by dates and more.
Forum BoardReader BoardReader is developed to address the shortcomings of current search engine technology to accurately nd and display 13,091
information contained on the Web's forums and message boards. It uses proprietary software that allows users to search multiple
message boards simultaneously, allowing users to share information in a truly global sense.
Micro blog Twitter Twitter, a micro blogging service, has emerged as a new medium in the spotlight through recent events, such as the death of Steve 24,505
Jobs and the Libyan uprising. Twitter users follow others or are followed. Unlike most online social networking sites, such as
Facebook or MySpace, the relationship of following and being followed requires no reciprocation. A user can follow any other user,
and the user being followed need not follow back. A common practice of responding to a tweet has evolved into a well-dened
markup culture: RT stands for retweet, @ followed by a user identier addresses the user, and # followed by a word represents a
hashtag. This well-dened markup vocabulary combined with a strict limit of 140 characters per posting conveniences users with
brevity in expression.
Conventional Google Google News is a computer-generated news site that aggregates headlines from news sources worldwide. In this research, we choose 3782
News News 10 big news sources as conventional media sources. There are ABC News, New York Times, Reuters, USA Today, Fox News, Wall Street
Journal, Washington Post, CNN, The Economist and Forbes.

the probability that a document B is of type A just by looking at the fre-
quencies of words in the document. In our classication task, we use the
Bayes Rule in updating the probability of event A (frequencies of words
or terms) happening given that we've observed B (positive or negative
sentiment).
For the purposes of text classication, the Bayes Rule is used to deter-
mine the category a document falls into by determining the most prob-
able category. That is, given this document with these words in it, which
category does it fall into? A category is represented by a collection of
words and their frequencies while the frequency is the number of
times that each word has been seen in the documents used to train
the classier. Suppose there are n categories C0 to C(n1) (in our case,
here are only two categories, positive or negative). Determining which
category a document D is mostly associated with means calculating
the probability that document D is in category Ci, written P(Ci|D) for
each category Ci.
Then we can calculate P(Ci|D) by computing:
calculated as the total number of words in Ci divided by the total
number of words in all the categories put together. Hence, P(Ci|D) is:
P W 0 jC i  P W 1 jC i   P W m1 jC i  P C i : 8
Then we pick the highest probability category as the label of docu-
ment D.
A common criticism of Nave Bayesian text classiers is that they
make the nave assumption that words are independent of each
other and are, therefore, less accurate than a more complex model.
There are many more complex text classication techniques, such as
Support Vector Machines, K-nearest Neighbor, and so on. In practice,
Nave Bayesian classiers often perform well, and the current state of
sentiment analysis indicates that they work very well for sentiment
polarity classication [4,31].
3.3. Data and measures for rm nancial value

P DjC i P C i We obtain nancial-statement and nancial-market data from

C i jD : 5
P D
P(Ci|D) is the probability that document D is in category Ci; that is,
the probability that given the set of words in D, they appear in category
Ci. P(D|Ci) is the probability that for a given category Ci, the words in D
appear in that category. P(Ci) is the probability of a given category;
that is, the probability of a document being in category Ci without con-
sidering its contents. P(D) is the probability of that specic document
occurring. To calculate which category D should go in, we need to calcu-
late P(Ci|D) for each of the categories and nd the largest probability.
Because each of those calculations involves the unknown but xed
value P(D), we just ignore it and calculate:
P C i jD P DjC i  P C i :
P(D) can also be safely ignored because you are interested in the
relative, not absolute, values of P(Ci|D), and P(D) simply acts as a scal-
ing factor on P(Ci|D). D is split into the set of words in the document,
called W0 through Wm 1. To calculate P(D|Ci), we need to know the
likelihood that each word appears in Ci rst. Assume that words ap-
pear independently from other words (which is clearly not true for
most languages) and P(D|Ci) is the simple product of the probabilities
for each word:
P DjC i P W 0 jC i  P W 1 jC i   P W m1 jC i :
For any category, P(Wj|Ci) is calculated as the number of times Wj
appears in Ci divided by the total number of words in Ci. P(Ci) is
COMPUSTAT and the Center of Research in Security Prices (CRSP). We
use these data to construct measures of abnormal returns and cumula-
tive abnormal returns. Fama and French [12] present a time-series
model of the evolution of excess security returns (relative to a risk-free
rate) as a function of excess market returns, a high-minus-low market-
to-book ratio factor, and a small-minus-big market capitalization factor.
The Fama and French four factor model is therefore often used as the
benchmark model to generate normal returns. This model extends the
market model with the returns on a size portfolio (SMB), a value
portfolio (HML) and a momentum portfolio (UMD). FamaFrench-
momentum four-factor model is:
Rjt j j Rmt sj SMBt hj HMLt uj UMDt jt 9
6
where Rjt is the rate of return of the common stock of the jth rm on day t;
Rmt is the rate of return of a market index on day t; SMBt is the average
return on small market-capitalization portfolios minus the average re-
turn on three large market-capitalization portfolios; HMLt is the average
return on two high book-to-market equity portfolios minus the average
return on two low book-to-market equity portfolios; UMDt is the aver-
age return on two high prior return portfolios minus the average return
on two low prior return portfolios. jt is a random variable that, by con-
struction, must have an expected value of zero, and is assumed to be
uncorrelated with Rmt, uncorrelated with Rkt for kj, not autocorrelated,
7 and homoskedastic. j is a parameter that measures the sensitivity of Rjt
to the excess return on the market index; sj measures the sensitivity of
Rjt to the difference between small and large capitalization stock returns;
hj measures the sensitivity of Rjt to the difference between value and
 Y. Yu et al. / Decision Support Systems 55 (2013) 919926 923

growth stock returns; and uj measures the sensitivity of Rjt to the differ- Table 3
ence between high prior return stock returns and low prior return stock Description of key variables.

returns. Thus, we dene the abnormal return (ARjt) (or prediction error)
from the common stock of the jth rm on day t as:
 
ARjt Rjt ^ R ^s SMB h^ HML u
^j ^ j UMDt
j mt j t j t
where the coefcients ^ ; ^s ; h^ and u
^ j; ^ j are ordinary least squares esti-
j j j
mates of j,j,sj,hj and uj. The idiosyncratic risk (IRjt) is the standard devi-
ation of the model residuals.
4. Econometric modeling and estimation results
We estimate two equations, where endogenous variables are rm eq-
uity value (return and risk), using the xed-effects panel data estimation
technique. To control for any company idiosyncratic factors that could in-
uence stock return and risk, such as company size, industry characteris-
tics, and others, we include company xed effects in the model by adding
company-specic dummy variables. The company-specic xed effects
capture the idiosyncratic and time-constant unobserved characteristics
associated with each company in our data. The advantage of xed effects
estimation is that it controls for intrinsic company characteristics, which
inherently affect stock movement. In addition, xed effects estimation
also allows the error term to be arbitrarily correlated with other explan-
atory variables, thus making the estimation results more robust. Table 3
describes the variable name and measures. Table 4 shows the descriptive
statistics.
The two equations are specied as follows:
m m n n
ARit r X i;t1 r X i;t1 r i it 11
m m n n
IRit s X i;t1 s X i;t1 s i it : 12 conventional media mentions, only the interaction terms of forum and
Eq. (11) uses the abnormal return (ARit) as the dependent variable,
and Eq. (12) uses the idiosyncratic risk (IRit) as the dependent vari-
able. Let i = 1,,N index the companies, t = 1,,T index the time
m
(day), Xi,t 1 is a vector of one-day lagged independent variables
including all three social media (blog, forum, and Twitter) metrics,
n
and Xi,t 1 is a vector of one-day lagged independent variables of con-
ventional news media metrics. i and i denote the company-specic
xed effects that capture the idiosyncratic characteristics associated
with each company.
Table 5 shows the xed-effect estimation results using the total vol-
ume or sentiment of social and conventional media as the independent
variables. In Model (a1), only total number of social media counts has a
signicant positive relationship with risk, but not with return. In Model
(a2), the interaction term of the social and conventional media counts is
added. It is shown that the interaction term has a marginally negative re-
Variable Description and measure
ARit The abnormal return of the stock price for company i at day t.
IRit The idiosyncratic risk of the stock price for company i at day t.
10 BLOG_POS_NUMit The number of positive sentiment blogs for company i at day t.
BLOG_NEG_NUMit The number of negative sentiment blogs for company i at day t.
BLOG_NUMit Total number of mentions in blogs for company i at day t.
BLOG_SENTIit Overall sentiment in blogs for company i at day t.
FORUM_POS_NUMit The number of positive sentiment forums for company i at day t.
FORUM_NEG_NUMit The number of negative sentiment forums for company i at day t.
FORUM_NUMit Total number of mentions in forums for company i at day t.
FORUM_SENTIit Overall sentiment in forums for company i at day t.
TWEET_POS_NUMit The number of positive sentiment Tweets for company i at day t.
TWEET_NEG_NUMit The number of negative sentiment Tweets for company i at day t.
TWEET_NUMit Total number of mentions in Tweets for company i at day t.
TWEET_SENTIit Overall sentiment in Tweets for company i at day t.
NEWS_POS_NUMit The number of positive sentiment news for company i at day t.
NEWS_NEG_NUMit The number of negative sentiment news for company i at day t.
NEWS_NUMit Total number of mentions in news for company i at day t.
NEWS_SENTIit Overall sentiment in news for company i at day t.
MEDIA_NUMit Total number of mentions in social media for company i at day t.
NEWS_SENTIit Overall sentiment in social media for company i at day t.
short term span of the dataset and one-day lagged independent variable
setting. Previous research indicates that stock market may need some
time to respond to the social media information [25].
We then extend our analysis in Table 5 to examine the impact of
each individual media metrics. Table 6 shows the results of using num-
ber of mentions (count) of each media metrics. Model (b1) shows that
number of blog mentions has a marginal negative effect on return but a
signicantly positive effect on risk. Number of forum mentions has a
negative effect on return. Number of tweets has a signicantly positive
effect on risk. Model (b2) adds the interaction terms between social and
news mentions, and Twitter and news mentions, have a marginally
negative effect on return. Risk, nevertheless, seems to be signicantly
inuenced by most variables. Besides number of blog mentions and
tweets, number of conventional news mentions is also found to be pos-
itively and signicantly correlated with risk. The interaction terms of
forum and news mentions, and Twitter and news mentions, have a neg-
ative relationship with risk. Consistent with the results in Table 5, re-
sults in Table 6 suggest that the sheer volume of social media may
help conventional media to reduce the risk, though the social media
volume itself may increase the risk. Again, the return of the stock
price seems to be only marginally affected.
Table 4
Summary statistics of the daily data.
Variable N Mean Median Std. Dev. Min. Max.

lationship with return, but a highly negative signicant relationship AR 50,611 0.0002 0.0005 0.04 0.61 1.36
with risk. Considering that the social media volume is signicantly larger IR 50,611 0.03 0.02 0.02 0.01 0.14
BLOG_POS_NUM 50,611 0.25 0.00 0.97 0.00 42.00
than conventional media, this result suggests that the volume of social
BLOG_NEG_NUM 50,611 0.01 0.00 0.08 0.00 4.00
and conventional media complements with each other to reduce the BLOG_NUM 50,611 0.44 0.00 1.64 0.00 76.00
uncertainty associated with the stock prices. In Model (a3) and (a4), BLOG_SENTI 50,611 0.24 0.00 0.96 2.00 42.00
we nd that the social media sentiment has a strong positive relation- FORUM_POS_NUM 50,611 0.56 0.00 2.00 0.00 64.00
ship with stock risk, indicating that the overall sentiment of social FORUM_NEG_NUM 50,611 0.00 0.00 0.06 0.00 3.00
FORUM_NUM 50,611 1.23 0.00 3.80 0.00 109.00
media channels may increase the uctuation of the stock market. The in-
FORUM_SENTI 50,611 0.55 0.00 2.00 1.00 64.00
teraction term of the social and conventional media sentiment does not TWEET_POS_NUM 50,611 0.11 0.00 0.82 0.00 77.00
show a signicant relationship with either return or risk. Results in TWEET_NEG_NUM 50,611 0.40 0.00 1.97 0.00 227.00
Table 5 demonstrate that overall social media metrics has a strong rela- TWEET_NUM 50,611 3.17 0.00 9.37 0.00 573.00
TWEET_SENTI 50,611 0.29 0.00 1.76 150.00 52.00
tionship with risk, which indicates that the information instilled from
NEWS_POS_NUM 50,611 0.05 0.00 0.24 0.00 5.00
various social media channels may contribute to the uncertainty of the NEWS_NEG_NUM 50,611 0.00 0.00 0.07 0.00 2.00
market. In addition, we notice that the impact of count and sentiment NEWS_NUM 50,611 0.08 0.00 0.33 0.00 6.00
may have different directions, which suggest the importance of delving NEWS_SENTI 50,611 0.04 0.00 0.24 2.00 5.00
into the textual content mentioned in the media. Furthermore, it seems MEDIA_NUM 50,611 4.84 0.00 10.99 0.00 573.00
NEWS_SENTI 50,611 0.51 0.00 2.80 150.00 67.00
the impact is more salient with risk than return. This may be due to the
924 Y. Yu et al. / Decision Support Systems 55 (2013) 919926

Table 5
Fixed effects estimation results for overall social media and news.

Variable Coefcient (Std. Err.) Coefcient (Std. Err.) Coefcient (Std. Err.) Coefcient (Std. Err.)

Model (a1) Model (a2) Model (a3) Model (a4)

Return equation: with abnormal return ARit as dependent variable

Constant .0002 (.0002) .0003 (.0002) .0002 (.0002) .0003 (.0002)
NEWS_NUMi,t1 .0002 (.0005) .001 (.001)
MEDIA_NUMi,t1 9.43e 06 (.00002) .00003 (.00002)
NEWS_SENTIi,t1 .00003 (.0006) .001 (.001)
MEDIA_SENTIi,t1 .00002 (.00002) .00003 (.00002)
NEWS_NUMi,t1 MEDIA_NUMi,t1 .00004 (.00002)
NEWS_SENTIi,t1 MEDIA_SENTIi,t1

Risk equation: with idiosyncratic risk IRit as dependent variable

Constant .03 (9.97e 06) .03 (.00001) .03 (9.75e 06) .03 (9.88e 06)
NEWS_NUMi,t1 .00004 (.00003) .0001 (.00004)
MEDIA_NUMi,t1 8.36e 06 (9.4e 07) 1.00e 05 (1.06e 06)
NEWS_SENTIi,t1 .00003 (.00003) .00005 (.00004)
MEDIA_SENTIi,t1 7.92e 06 (1.35e 06) 8.50e 06 (1.44e 06)
NEWS_NUMi,t1 MEDIA_NUMi,t1 4.46e 06 (1.31e 06)
NEWS_SENTIi,t1 MEDIA_SENTIi,t1 2.55e 06 (2.21e 06)
N = 49,807 Group = 824

Note: standard errors in parentheses.

Company dummies (xed effects for each of the 824 companies) used in estimating the model are not reported.
p b .01.
p b .05.
p b .10.

Table 7 shows the estimation results using sentiment measures for
each individual media. Results in Model (b3) is consistent with that in
Model (b1), that blog sentiment has a positive impact but forum senti-
ment has a negative impact on return. Both blog and Twitter sentiment
are also found to have a positive effect on risk. Interestingly, as shown in
Model (b4), it seems the interaction term between Twitter and news
sentiment has a signicant negative effect on returns, but none of the
interaction terms has a signicant effect on risk. Considering results in
Tables 6 and 7 together, social media metrics seem to have a much
stronger impact than conventional news metrics, yet social media and
conventional news media do have a joint effect on the market. The ef-
fect also seems to be stronger on risk than return, and the volume of
the inuence is more salient than the sentiment. Moreover, each social
medial metrics, as well as its interaction with conventional media met-
rics, has a varied impact on risk and return.
Lastly, we examine the count of positive and negative count of media
mentions on stock performance to get more insights on the effect at a
more granular level. Table 8 shows the results. Positive blog posts have
a strong positive impact on return, and negative forum posts have a
strong negative impact on return. The results provide a better explana-
tion for results shown in Tables 6 and 7, which suggest that the majority
of blog posts may be positive comments on companies and products,
while forum posts may have more negative discussions. For the risk
equation, we nd positive blog posts also contribute to the uctuation
of the market. Interestingly, both positive and negative tweets have pos-
itive relationships with the risk. This is also consistent with the results in

Table 6
Fixed effects estimation results for volume of individual social media and news.

Variable Coefcient (Std. Err.) Coefcient (Std. Err.)

Model (b1) Model (b2)

Return equation: with abnormal return ARit as dependent variable

Constant .0002 (.0002) .0003 (.0001)
BLOG_NUMi,t1 .0002 (.0001) .0002 (.0001)
FORUM_NUMi,t1 .0001 (.00004) .0001 (.00005)
TWEET_NUMi,t1 .00002 (.00002) .00004 (.00002)
NEWS_NUMi,t1 .0002 (.0005) .001 (.001)
BLOG_NUMi,t1 NEWS_NUMi,t1 .00003(.0002)
FORUM_NUMi,t1 NEWS_NUMi,t1 .0002 (.0001)
TWEET_NUMi,t1 NEWS_NUMi,t1 .00004 (.00003)

Risk equation: with idiosyncratic risk IRit as dependent variable

Constant .03 (.00001) .03 (.00001)
BLOG_NUMi,t1 .00002 (6.56e 06) .00002 (6.93e 06)
FORUM_NUMi,t1 2.48e 06 (2.44e 06) 8.36e 07 (2.60e 06)
TWEET_NUMi,t1 9.4e 06 (1.06e 06) .00001 (1.21e 06)
NEWS_NUMi,t1 .00003 (.00003) .0001 (.00004)
BLOG_NUMi,t1 NEWS_NUMi,t1 7.66e 06 (.00001)
FORUM_NUMi,t1 NEWS_NUMi,t1 8.80e 06 (5.15e 06)
TWEET_NUMi,t1 NEWS_NUMi,t1 4.59e 06 (1.41e 06)
N = 49,807 Group = 824

Note: standard errors in parentheses.

Company dummies (xed effects for each of the 862 companies) used in estimating the model are not reported.
p b .01.
p b .05.
p b .10.
 Y. Yu et al. / Decision Support Systems 55 (2013) 919926 925

Table 7
Fixed effects estimation results for sentiment of individual social media and news.

Variable Coefcient (Std. Err.) Coefcient (Std. Err.)

Model (b3) Model (b4)

Return equation: with abnormal return ARit as dependent variable

Constant .0002 (.0002) .0003 (.0002)
BLOG_SENTIi,t1 .0002 (.0001) .0002 (.0001)
FORUM_SENTIi,t1 .00007 (.00004) .00004 (.00005)
TWEET_SENTIi,t1 .00004 (.00003) .00005 (.00003)
NEWS_SENTIi,t1 .0001 (.0005) .001 (.0006)
BLOG_SENTIi,t1 NEWS_SENTIi,t1 .00004(.0002)
FORUM_SENTIi,t1 NEWS_SENTIi,t1 .00007 (.00005)
TWEET_SENTIi,t1 NEWS_SENTIi,t1 .0002 (.0001)

Risk equation: with idiosyncratic risk IRit as dependent variable

Constant .03 (.001) .03 (.001)
BLOG_SENTIi,t1 .00003 (6.68e 6) .00003 (7.03e 6)
FORUM_SENTIi,t1 2.97e 06 (2.51e 06) 1.57e 06 (2.65e 06)
TWEET_SENTIi,t1 .00001 (1.70e 06) .00001 (1.83e 06)
NEWS_SENTIi,t1 .00002 (.00003) .0001 (.00004)
BLOG_SENTIi,t1 NEWS_SENTIi,t1 .00001(.00001)
FORUM_SENTIi,t1 NEWS_SENTIi,t1 1.15e 06 (2.57e 06)
TWEET_SENTIi,t1 NEWS_SENTIi,t1 8.85e 06 (5.41e 06)
N = 49,807 Group = 824

Note: standard errors in parentheses.

Company dummies (xed effects for each of the 824 companies) used in estimating the model are not reported.
p b .01.
p b .05.
p b .10.

Tables 6 and 7 that both volume and sentiment of Twitter posts are sig- setters and rms. In this study, we use both social media and conventional
nicantly positively related to risk. Only negative news mentions are data to empirically evaluate the effect. With a sample of 52,746 messages
found to have a marginally positive signicant relationship with risk. from 824 rms from various social media and conventional media
sources, we cover six industries including pharmaceutical, retail, software,
5. Discussion and conclusion savings institutions, health care, and hotel. Our ndings add to the litera-
ture on media's impact on rm stock performances. Specically, we show
The effect of social media and conventional media, their relative im- that overall social media sentiment has a stronger impact on rm stock
portance, and their interrelatedness on short term rm stock market per- performance than conventional media, while social and conventional
formances (e.g., return and risk) is of interest to academics, standard- media have a strong interaction effect on stock performance. These results
highlight the importance of social media and conventional media (in a
Table 8 less degree) on rm stock performance and uncover the moderating rela-
Fixed effects estimation results for sentiment of individual social media and news. tionship between these two types of media sources. Next, we examine
whether the effect of social media on rm stock performance varies
Variable Coefcient (Std. Err.)
depending on social media type (e.g., blogs, Twitter, and forums). Specif-
Model (c1) ically, using sentiment measures for each individual media, we nd that
Return equation: with abnormal return ARit as dependent variable blog sentiment has a positive impact while forum sentiment has a nega-
Constant .0003 (.0002) tive impact on return. Additionally, both blog and Twitter sentiment are
BLOG_POS_NUMi,t1 .0002 (.0001)
found to have a positive effect on risk. Further, we nd that the interaction
BLOG_NEG_NUMi,t1 .00004 (.002)
FORUM_POS_NUMi,t1 .00004 (.00004) effect between Twitter and news sentiment has a signicant negative ef-
FORUM_NEG_NUMi,t1 .003 (.001) fect on returns and but not a signicant effect on risk. Lastly, we examine
TWEET_POS_NUMi,t1 .00003 (.00003) the count of positive and negative count of media messages on stock per-
TWEET_NEG_NUMi,t1 .00003 (.00005)
formance to gather insights on the effect at a more detailed level. We doc-
NEWS_POS_NUMi,t1 .0002 (.0005)
NEWS_NEG_NUMi,t1 .003 (.002)
ument that positive blog posts have a strong positive impact on return
while negative forum posts have a strong negative impact on return.
Risk equation: with idiosyncratic risk IRit as dependent variable We conjecture that blog messages contain more positive contents while
Constant .03 (.001) forum messages are more negative oriented. Thus, better social media re-
BLOG_POS_NUMi,t1 .00002 (6.75e 06)
search may be associated with the quality in information availability and
BLOG_NEG_NUMi,t1 .0001 (.0001)
FORUM_POS_NUMi,t1 2.71e 06 (2.56e 06) information processing.
FORUM_NEG_NUMi,t1 .00002 (.00005) In summary, our results do not suggest that textual analysis of vari-
TWEET_POS_NUMi,t1 .00001 (1.47e 06) ous media sources will resolve, to paraphrase Roll [33], our profession's
TWEET_NEG_NUMi,t1 9.62e 06 (2.86e 06) modest ability to explain stock returns. Our results, however, suggest
NEWS_POS_NUMi,t1 .00002 (.00003)
NEWS_NEG_NUMi,t1 .0002 (.0001)
that textual analysis can contribute to our ability to understand the im-
N = 49,807 Group = 824 pact of information from stock returns, and even if sentiment in media
sometimes does not directly cause returns it might be an efcient way
Note: standard errors in parentheses.
Company dummies (xed effects for each of the 824 companies) used in estimating the for analysts to capture other sources of information. Another limitation
model are not reported. lies in that we examine the overall media sentiment rather than being
p b .01. business domain (e.g., accounting or nance) specic. We suggest that
p b .05.
nancial and business intelligence researchers be cautious when relying
p b .10.
on word classication schemes derived outside the domain of business
926 Y. Yu et al. / Decision Support Systems 55 (2013) 919926
usage. Applying non-business word lists to accounting and nance
topics can lead to a high misclassication rate and spurious correlations.
Nevertheless, the study opens up avenues for future research that
could examine media effects on rm stock performance applying specic
accounting or nance domain knowledge. Another area for future study
is to explore the tone of the messages in various media sources and the
extent of sentiment among the general public as compared to the senti-
ment among more sophisticated media practitioners such as analysts.
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Yang Yu is currently an MIS Ph.D. candidate in the Rawls
College of Business at Texas Tech University. Yang also
holds a Management Science and Engineering Ph.D. from
the School of Economics and Management at Beijing Univer-
sity of Aeronautics & Astronautics. Yang's research interests
include social media, business intelligence, IT security
and supply chain information systems. He has published
papers in journals such as Decision Support Systems, Infor-
mation Systems and E-Business Management. He has been
awarded the Best Interdisciplinary Research Award at the
Decision Sciences Institute Conference (DSI), 2012.
Wenjing Duan, Associate Professor of Information Systems &
Technology Management, received her Ph.D. in Information
Systems from University of Texas at Austin in 2006. Wenjing's
research interests glide the intersections between Information
Systems, Economics, and Marketing. Among her primary re-
search interests are the social and economic impact of online
consumer-generated content and social media, online commu-
nities and online social network, information systems and
marketing, and healthcare and IT. Wenjing has published in
MIS Quarterly, Information Systems Research, Communications
of ACM, Journal of Retailing, Decision Support Systems, among
others. She is also the recipient of the Emerald Management
Reviews Citations of Excellence Awards, NET Institute Research
Grant, and serves on the Editorial Board of the Decision
Support Systems. For more details, see http://home.gwu.edu/~wduan/.
Dr. Qing Cao is the Jerry Rawls Professor of Management
Information Systems at the Rawls College of Business,
Texas Tech University. He holds a Ph.D. from the College
of Business Administration at the University of Nebraska
(2001). His research interests include IT governance, sup-
ply chain information management, strategic alignment,
and business intelligence. Dr. Cao was the recipient of the
University of Missouri-Kansas City Trustee's Faculty Re-
search Award (2005). Dr. Cao has received the 2012
Chancellor's Council Distinguished Research Award at Tex-
as Tech University. He is also a recipient of the Best Inter-
disciplinary Research Award at the 43rd Annual Decision
Sciences Institute (DSI) Conference, 2012. Dr. Cao has
published more than 42 research papers in top business
journals such as Journal of Operations Management, Decision Sciences, Decision Support
Systems, Communications of ACM, International Journal of Production Research, European
Journal of Operational Research, among many others. Dr. Cao also served as the Associ-
ate Program Chair at the Decision Sciences Institute (DSI) Annual Meeting in 2008.