Prepared by: Marius Zoican

3rd Toronto FinTech Conference
November 5, 2020

Discussion of

"The Social Internetwork and Stock Returns"

(Al Guindy and Riordan)

Identify pervasive "themes" in the economy

How do you think of Tesla?

  1. A car manufacturer (like Ford) or
  2. A tech company (like Facebook)

This paper:

  • Use Twitter cashtag data (e.g., $TSLA)  to identify how people make connections between firms.
  • Very refreshing and innovative idea!

Thematic investment is here already

  • ETFs invest in cross-industry themes (e.g., religion)
  • "Top-down" themes: proposed by ETF issuers.
  • This paper: "bottom-up" -- what do investors perceive?

Social Internetwork is to Thematic ETFs as

Principal Component Analysis is to Factor Identification

In essence, an agnostic & data-driven perspective of what the themes might be:

(useful for ETF design?)

Next step: assess marginal contributions?

Interesting to decompose the social inter-network.

How much of it (on the margin) comes from:

  1. Industry peer correlations;
  2. Supply chain relationships;
  3. Corporate governance / ESG values;
  4. "Intangible" perceptions: Tesla is a tech company.
  5. Technical analysis and "tips" from Twitter users.

You mention many times "non-linear, non-trivial" connections. Next step is to flesh them out!

How much of the data is noise?

is a Wild West!

I would narrow it down. Can you distinguish between:

  1. Corporate Twitter accounts;
  2. Financial industry Twitter accounts;
  3. Journalist Twitter accounts;
  4. Everyone else.

Additional comments

  1. What does the strength of a link represent? Re-tweets? Commonality of perception?
  2. Why not control for traditional factors in the return analysis (Fama French, momentum, etc.)?
  3. Are some companies much more likely to draw attention from social media users (cool, flashy Tech stocks)?
  4. To what extent does the network capture market sentiment?

Discussion: The Social Internetwork and Stock Returns

By Marius Zoican

Discussion: The Social Internetwork and Stock Returns

Discussion of "The Social Internetwork and Stock Returns" at the 3rd Toronto FinTech Conference (November 2020)

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