Social Media Dynamics of Shorted Companies

Abstract

The discussions on social-media forums can impact the sentiment of a company, and consequently also its stock price. As we show here, some of the most shorted companies have provided some of the clearest examples of this relationship. In light of these observations, this paper presents a longitudinal study of the cross-forum dynamics of ten highly shorted stocks that saw significant discussions on the popular forums Reddit, Twitter, and Seeking Alpha. Using the posts from these forums, their sentiments, and the daily snapshots of the stock price of each company, we use a combination of qualitative case studies and quantitative hypothesis testing to derive new insights. Through a combination of time-series analysis, clustering, and domain-optimized sentiment analysis, we study the relationship between the times that discussions peak on the different forums, the changes in sentiment, and the stock price movements. We find that all three forums are likely to experience peaks in their activity close to each other, that Reddit is most likely to peak first, and that the sentiment of Twitter discussions were more sensitive to the current derivative of the stock price than the sentiment observed on the other forums.