Practical Applications of Momentum, Mean-Reversion, and Social Media: Evidence from StockTwits and Twitter

Practical Applications Summary

In Momentum, Mean-Reversion, and Social Media: Evidence from StockTwits and Twitter, from the Summer 2018 issue of The Journal of Portfolio Management, Shreyash Agrawal, Pablo D. Azar, Andrew W. Lo, and Taranjit Singh (all at MIT) demonstrate that social media activity can significantly affect liquidity on an intraday basis and that negative sentiment has a much larger effect than positive sentiment on liquidity. The authors propose an intraday trading strategy based on sentiment as reflected by social media and show that the strategy outperforms a basic intraday mean-reversion strategy (before transaction costs).

TOPICS: Security analysis and valuation, statistical methods