The power of prediction with Google searches and social media posts: Retail investor interest and IPO pricing

Ka Wai (Stanley) Choi; Wentao Ma; Shuk Ying Ho; Dickson Wu

doi:10.1016/j.im.2024.103972

The power of prediction with Google searches and social media posts: Retail investor interest and IPO pricing

Ka Wai (Stanley) Choi, Wentao Ma^*, Shuk Ying Ho, Dickson Wu

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

This paper investigates the association between retail investors’ online activity and the pricing of initial public offerings (IPOs). We utilize data from Google Trends and StockTwits to analyze price revision for 901 U.S. IPOs, and find that the online search count, social media post count, and post sentiment are positively associated with IPO pricing. One-standard-deviation increases in these variables correspond to price revision increases of 9.02 %, 50.73 %, and 70.22 %, respectively. Additionally, online search plays a more significant role in influencing IPO price revision when social media discussions about a specific IPO exhibit higher sentiment inequality among participants.

Original language	English
Article number	103972
Journal	Information and Management
Volume	61
Issue number	5
DOIs	https://doi.org/10.1016/j.im.2024.103972
Publication status	Published - Jul 2024
Externally published	Yes

Keywords

Gini indices
Google search
Initial public offerings
Retail investor interest
StockTwits
Underwriters

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10.1016/j.im.2024.103972

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title = "The power of prediction with Google searches and social media posts: Retail investor interest and IPO pricing",

abstract = "This paper investigates the association between retail investors{\textquoteright} online activity and the pricing of initial public offerings (IPOs). We utilize data from Google Trends and StockTwits to analyze price revision for 901 U.S. IPOs, and find that the online search count, social media post count, and post sentiment are positively associated with IPO pricing. One-standard-deviation increases in these variables correspond to price revision increases of 9.02 %, 50.73 %, and 70.22 %, respectively. Additionally, online search plays a more significant role in influencing IPO price revision when social media discussions about a specific IPO exhibit higher sentiment inequality among participants.",

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AB - This paper investigates the association between retail investors’ online activity and the pricing of initial public offerings (IPOs). We utilize data from Google Trends and StockTwits to analyze price revision for 901 U.S. IPOs, and find that the online search count, social media post count, and post sentiment are positively associated with IPO pricing. One-standard-deviation increases in these variables correspond to price revision increases of 9.02 %, 50.73 %, and 70.22 %, respectively. Additionally, online search plays a more significant role in influencing IPO price revision when social media discussions about a specific IPO exhibit higher sentiment inequality among participants.

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The power of prediction with Google searches and social media posts: Retail investor interest and IPO pricing

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Keywords

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