While conventional corporate communication channels are not completely dead, studies have shown that social media stock mentions can provide new insight into the direction of a stock. Using Twitter, Facebook, and other social media outlets, CEOs and other leaders can circumvent traditional corporate communications. The online popularity of companies is correlated with their stock performance, according to studies. However, despite its promise, the world of social media can also present investors with new challenges and opportunities. A half-billion tweets are posted each day in the Twittersphere, and investors have to sort through the overwhelming amount of information and determine what to believe.
In a study, Twitter users mainly tweet about stock trading and share predictions about stock prices. The posts are limited to 160 words, so researchers were able to gather data from more than 156,000 users. They found that tweets about stocks were positively related to daily stock returns. Even though these data were not conclusive, they may help investors make more accurate predictions about stock prices. This is a powerful way to monitor stock mentions.
Another way to make sense of social media mentions is to analyze sentiment. If you see a spike in mentions around a product or service, this could be a sign that your target audience is dissatisfied with it. While mentions aren’t entirely reliable, they help you gauge the general mood of your audience. If a flurry of positive feedback is accompanied by a flood of negative feedback, you may need to make changes to your product or service.