Social Media: A Stock Driver
https://www.investopedia.com/financial-edge/0212/the-power-of-social-media-influencing-trading-and-the-markets.aspx
For the casual investor and social media user, it is not difficult to realize that the two things may be causally linked. In recent years we’ve seen a viral video of a CEO smoking marijuana cause the public company’s stock price to plummet and videos of the same company’s truck unveilings this year are proof that the idea of social media influencing the stock market is alive and well. This article describes a few (of many) ways that social media has an impact on the stock market, ranging from the availability of information and the spread of news to the wide array of resources and investors within everyone’s social network. Tesla’s stock price dropped 6 points resulting in quite a hilarious looking graph that directly correlates to the cybertruck presentation (the broken windows and all). This, to me, shows how much influence social media can have on stocks.
This concept has been discussed in class. If we consider stocks to be a product or something of value to people in a network. Stocks follow very distinct network effects, and stock is worth more to any investor if more people also want it. For this reason, and considering the spread of information in a social network (another, separate, network effect), quick reactions on social media to current events in connection with a given company can have just as great an impact on the stock price as any quarterly earnings announcements. The sentiment of the user-generated content on social media, representing the opinion of the public with regards to a given company, is directly correlated to the company’s stock price. A promising apple keynote presentation can boost the stock after the social media reaction takes effect, and a steel ball bearing thrown through a window of the cybertruck prototype can drop a stock fairly quickly too.