Are Social Media Analysts Disrupting the Relevance of Sell-Side Analyst Research?

We examine the impact of “social media analysts,” individuals posting equity research online via social media investment platforms, on the relevance of research produced by professional sell-side equity analysts. Using data from Seeking Alpha, we find that the market reaction to sell-side analysts' forecasts is substantially reduced when preceded by the report of a social media analyst. Cross-sectional analyses suggest that this result is more pronounced for social media analysts with greater expertise, for those that provide more detailed analyses, and for firms with more retail investors. Additionally, social media analyst reports pre-empt the information content of sell-side analyst forecasts when the tenor of the two information sources is similar. We also show this disruption effect is not limited to earnings forecasts but impacts other outputs included in sell-side analyst reports. Collectively, our results suggest that equity research posted online by social media analysts is disrupting the relevance of sell-side equity research and speak to the evolving role of social media in capital markets