Social Media & the Danish Stock Market

Pil Nyrop Skøtt

Student thesis: Master thesis

Abstract

Background – Based on findings mainly in the American stock market, it has been suggested that social media influence stock markets in a way, which may be used to maximize profit for investors. No such data are available for the Danish investors and stock market. Therefore, the present study is aimed at elucidating this question. Methods – The awareness of, interest in, desire to use, as well as the actual use of social media trading1 of four Danish professional investors are investigated through semi-structured interviews and the same are examined for 98 private Danish investors in a survey using a questionnaire validated through a pilot study. The relationship between social media and stock performance is examined by running timed comparisons of variations in activity of various social media and a set of stock performance indicators from five Danish companies listed in the C20 index. Social media activity is cumulated in 3-months periods from 2nd quarter 2015 to 4th quarter 2017. The stock performance is determined in the same quarters by comparing the change from day 1 in the quarter to first day in the next quarter. In one set of comparisons the stock performance is tested in the next quarter and compared to social media activity in the previous quarter. The covariation between social media activity and stock performance indicators are tested by simple and multiple regression analysis (STATA). For statistical analysis the Bonferroni correction and Benjamini-Hockberg False Discovery Rate correction methods are applied to correct for multiple comparisons. Results – The professional investors are generally aware of social media trading. Two of these investors have shown a further interest, but none actually have a desire to use social media trading. For the private investors, less than half are aware of social media trading, nine have a desire to use it and three indicate that they already use it. The analyses of correlations between social media activity and stock performance show significant correlations in 11 cases. Nine of these are related to the company Genmab and all correlate social media activity and stock performance within the same quarters. The two others relate to Danske Bank and Bavarian Nordic, and these correlate social media activity in one quarter to stock performance in the next quarter. The social media parameters that have influence on stock performance are: mentions on portals, positive mentions on portals, number of posts, number of articles, number of tweets, negative tweets and number of positive sentiments published on portals. In most cases, it has no influence on stock performance whether the general sentiments of the social media activity are positive or negative. significant models, the stock performance indicator is 1 Social media trading is a stock trading strategy that uses social media content volume or social media content sentiments to generate buy and sell signals for any stock exchange. Social media trading is described more in depth in the Conceptual Framework. 2 the P/E ratio. It is noticeable that mentions on Facebook, the most used social media in Denmark, have no influence on stock performance. Conclusions – Social media trading has not been utilized by Danish investors so far. Even though 11 significant correlations originate from the quantitative part of this study, a solid base for implementation of social media trading has not yet been established in the Danish market.

EducationsMSc in International Business, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2018
Number of pages100
SupervisorsAbid Hussain