Study: Stock market blogs beat financial news articles

The tone of stock market opinion blogs published on investor forum SeekingAlpha.com predicted stock returns, as well as earnings surprises, above and beyond what was evident from Wall Street analyst reports and financial news articles, according to researchers from City University of Hong Kong, Purdue University and the Georgia Institute of Technology.

Yuliya Chernova of The Wall Street Journal writes, “The researchers also noted that Seeking Alpha predicted stock returns above what was evident from news articles. The report used news stories published on Dow Jones News Service, which is a part of Dow Jones & Co., publisher of The Wall Street Journal. Dow Jones declined to comment.

“Overall, the findings fit with prior analysis in other fields on the way crowds can outsmart, or at least be just as smart, as professionals. Studies have shown, for example, that Wikipedia accuracy is similar to that of Encyclopedia Britannica.

“Crowd platforms have other advantages over professionals, besides accuracy — Seeking Alpha, for example, covers a greater stock universe than stock analysts, and Wikipedia has more subject entries than Encyclopedia Britannica. Plus, both get updated and revised as things change more quickly than their professional counterparts, Dr. Hu said.”

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