Extreme Opinions on Social Media

Abstract

In this study, we analyze the information value of extreme opinions on Twitter that are identified by the most positive and negative Twitter sentiments for each firm. We find that these extreme opinions predict stock returns without subsequent reversals. In addition, they contain incremental information regarding firm fundamentals that are identified by subsequent revisions in analysts' earnings forecasts and target prices. Finally, we find that the return predictability is attributed to the fundamental information contained in the extreme tweets. Our analysis sheds light on the role of extreme opinions on social media.