EFFECTS OF SOCIAL MEDIA ON STOCK MARKET AND

CRYPTOCURRENCY

Kanishksingh Pawar Dr AnuradhaSarkar

(kanishksinghpawar@gmail.com)
(anu_wadia@yahoo.co.in)
Pranit Tumbade VinayakMahadik
(pranit.tumbade1595@gmail.com) (Vinaymahadik2022@gmail.com)
Pradum Bhosale Swapnil Jiware
(pradumb3499@gmail.com)
(swapnil7249@gmail.com)
Siddhant Singh
(Siddhantsingh552@gmail.com)

ABSTRACT

In the world of investment, perfect timing is the in-thing. Next comes in line is information.
With the advent of technology, many social media platforms such as Twitter, Telegram,
YouTube, Instagram etc. have been playing a key role in providing information to users.
Because of its digitized environment, users have access to a variety of online information
sources to make wise investment decisions such as news media, independent social media
platforms, Instagram page or twitter handle of influential investor, etc. In short, it can be said
that with the rise of social media, there is now a quicker, more efficient way of dissemination
of data and information to influence investor judgements. This paper attempts to study how
social media influences the investing behaviour mindset of retail investor. The researchers
attempted Quantitative research with help the of online google form survey, where responses
from 220 people in the range of 20 to 50 age group have been recorded to find their source of
information about particular stocks/crypto in which they want to invest. Simple random
sampling was used for data collection. Chi square was used to test the hypothesis. The
authors conclude that social media plays an important role in influencing their investment
decision.
Keywords: - Social media, Influences, Investor, Information, Investment

INTRODUCTION
In today’s world there are not many people who are not using social media. Everybody
among us uses at least more than one social media platform. Now a days social media is
influencing our lives in many ways, we are changing our life styles according to social media.
As we say “change is the only constant”, our ways of investment have changed through the
passage of time. A long time ago we used to invest in properties like houses, lands. After
banking revolution in India in 1992 people started to invest in FD’s. After the classic era of
90’s as India took steps towards the digitalisation, we started to invest in stock market.
History of Indians of investing in stocks goes before independence but truly India started to
invest in stocks when it became digitalised. As financial literacy started to spread in India, we
Indians turned towards cryptocurrencies and social media is doing its job there also by
imprinting its influence. The influence of social media on the stock market is undeniable. In
many ways, it's a double-edged sword: while social media can promote stocks and make them
go viral, it can also lead to their downfall when investors start shorting them or betting
against them. Social media and other media outlets can cause cryptocurrency price
fluctuations, for better or for worse. Trending news about a large digital currency exchange
hack can cause a significant drop in digital currency value as well as single tweet by Social
media influencer can increase/decrease its current price into multiple folds(x10,x100 etc)
within a short span of time.

LITERATURE REVIEW

 Peiran Jiao Andre Veiga Ansgar Walther(2016) “Social media, news media and
the stock market”

In this paper they developed a theoretical model of asset pricing and information
processing, which allows for both rational traders and a variety of commonly studied
behavioural biases. The model yields several novel and testable predictions about the
impact of news and social media on asset prices. Then they tested the model’s
theoretical predictions using a unique dataset which measures coverage of individual
stocks in social and news media using a broad spectrum of print and online sources.
Stocks with high social media coverage in one month experience high idiosyncratic
volatility of returns and trading volume. Conversely, stocks with high news media
coverage experience low volatility and low trading volume.

 Xueming Luo, Jie Zhang, Jie Zhang(2013) “Social Media and Firm Equity
Value”

In their study they provided initial step toward examining the predictive relationship
between social media and firm equity value. The significance of social media for
transforming business organizations hope that future research will develop more
scientific time-series models to discover novel insights into the business value of
social media.This study states that Social media metrics can predict firm equity value
 and explain significantly greater proportions of the variance than conventional online
behavioural metrics in risk.

 Juan Pineiro Chousa , Marcos Vizcaino-Gonzalez, Ada Maria Perez-Pico “

Influence of Social Media over the Stock Market”

Their research analyses investors activity through social media and these media’s
influence over the Chicago Board Options Exchange Market Volatility Index (VIX)
using a logit model and a fuzzy-set qualitative comparative analysis(fsQCA). The
logit results show that social media sentiment influences stock markets. Meanwhile,
the fsQCA results show that the investors’ profile is important for explaining how
social media influence the stock market. Particularly, holding period combined with
experience in technical investors contributes to avoiding a raise in market risk,
whereas for nontechnical investors message sentiment and experience form the
combination that contributes to avoid a raise in market risk.

 Pablo Gomez-Carrasco and Giovanna Michelon (2017) “The Power of the

STAKEHOLDERS’ Voice: The Effects of Social Media Activism on Stock
Markets”

This study assesses the influence of social media activism on the stock market
performance of targeted terms. They focused on information published on Twitter by two
critical stakeholders, consumer associations and trade unions. To the extent that social
media represent a valid medium to mobilize stakeholders’ activism, protests on Twitter
may damage firm reputation, leading to capital market reactions. Using a corpus of over
1.5 million tweets referring to Spanish listed banks, they studied the impact of activism
by looking at targeted firms’ abnormal variations in price and trading volume. Their
findings suggest that the Twitter activism of key stakeholders has a significant impact on
investors’ decisions.

 Chahat Tandon , Sanjana Revankar (2021) “How can we predict the impact of
the social media messages on the value of cryptocurrency”

This paper targets to draw a correlation between the hyped tweets and the prices of
cryptocurrencies like Bitcoin. They also stated the future price values of Bitcoin using its past
values. By using cryptocurrencies’ financial data, twitter data and RAPIDS a fine line can be
drawn between the amount of impact tweets have on people as well as on the market. The
tweets on cryptocurrency were segregated and price forecasting was done using augmented
dickey fuller test and ARIMA models, 10 future values of bitcoin were predicted with 96%
accuracy and 0.0395 average error. Besides, from the investigations above of the authentic
cost of BTC, it is perfectly clear that there have been way more steep falls in the history of
Cryptocurrencies even before Elon started tweeting about it. Thus, it can clearly be stated that
no one person can control the utter volatile world of cryptocurrencies.

 Yuzhao Zhang , Haifei Liu (2021) “Stock market reactions to social media:
Evidence from WeChat recommendations”

This paper examines the market behaviour of stocks that are mentioned on official
WeChat account. This is the first paper to study the reactions of We Chat media
account on stock market. The empirical results show that there is a significantly
positive abnormal return and excess trading volume on the publication day. Moreover,
the cumulative average abnormal return for we chat account completely reverses in a
short time, which supports the price pressure hypothesis. Additional analyses reveal
that market reactions in the smaller firms are significantly greater than those in the
largest firms on the publication day.

Articles on Effects of Social Media on Stock Market and cryptocurrencies:

 In the article written by Jay Shan and the team of 4 other members of Miami
University in the Journal of Management Information Systems “How Does Social
Media Impact Bitcoin Value? A Test of the Silent Majority Hypothesis” they stated
that Bitcoin’s emergence has the potential to pave the way for a technological
revolution in financial markets. What determines its valuation is an important open
question with far-reaching business and policy implications. They examined the
dynamic interactions between social media and the monetary value of bitcoin using
textual analysis and vector error correction models. They showed that more bullish
forum posts are associated with higher future bitcoin values. Interestingly, social
media’s effects on bitcoin are driven primarily by the silent majority, the 95 percent
of users who are less active and whose contributions amount to less than 40 percent of
total messages.

 Another article written by Korhan Cengiz and the team of other 3 members of
Trakaya University published in the journal Information processing and management
on topic “Global cryptocurrency trend prediction using social media” they aimed to
investigate the global crypto-currency price movement trends with respect to the
social media communication data. The idea is to analyse the topical trends in the
online communities and social media platforms to understand and extract insights that
could be used to predict the price fluctuations in crypto-currencies. The hypothesis
 rests in finding the empirical evidence to exploit the relationship between price
variations and social media activities.

PROBLEM STATEMENT
Perception about social media among people whether it is influencing their investing decision
in stock market and cryptocurrency

RESEARCH OBJECTIVES

 This research paper aiming to prove that social media is playing big role in
influencing the stock market and cryptocurrencies.
 The primary and secondary data collected in this study analyses the relation between
financial market and social media.
 In this paper all the aspects of social media towards stock market are to be researched.

RESEARCH METHODOLOGY
This research involved a survey of college students, people from diverse profession, friends
and family members through online platform of Google forms. Source of data is primary data
which was collected through responses of two hundred and twenty individuals (220) within
age group of 20 to 50. Sampling was simple random method. A structured Questionnaire of
13 multiple choice questions were collected and analysed. The study was administered in
regions of Maharashtra, Chhattisgarh, Madhya Pradesh and Uttar Pradesh.

HYPOTHESIS
H0:- Social media does not have any effect on Stock market and cryptocurrency
Ha:- Social media have effect on Stock market and cryptocurrency

DATA ANALYSIS AND INTERPRETATION

Data was collected by questionnaire method from google forms and visual analysis of data is
done in excel. Total of 220 responses were recorded consisting of people from age group of
20 to 50. After collecting data from all the respondents, it was visually analysed in the form
of pie charts, bar graph. Descriptive statistics is used to summarize the collected data and
present it in most manageable form.
  Age wise distribution of respondents

Interpretation: - In this survey, out of 220 respondents, 94.1% of respondents falls under age
group of 20 to 30, 4,5% in age group of 30 to 40 and rest 1.4% in age group of 40 to 50.

 Distribution of respondents according to various social media platform they use

 Interpretation: - In this survey, out of 220 respondents, majority of respondents prefer
to use social media platform like Instagram, twitter, youtube and telegram

 Distribution of respondents according to account used for investing

Interpretation: - In this survey, out of 220 respondents, 27.3% respondents use demat
account to invest in stocks, 9.1% respondents use crypto account to invest in various
cryptocurrencies, 21.4% respondents use both demat and crypto account and rest
42.3% respondents don’t have any account.

 Opinion of people whether they prefer own analysis or not

Interpretation: - In this survey, out of 220 respondents, 56.8% respondents prefer to

do their own analysis about stocks or cryptocurrency before investing, rest 43.2%
respondents don’t prefer to do own analysis before investing.
 Opinion of people whether they prefer recommendation from social media platform or
not

Interpretation: - In this survey, out of 220 respondents, 54.1% respondents refer to

recommendation provided on social media platform before investing, rest 45.9% don’t
refer to recommendation provided on social media platform.

 Distribution of respondents according to method used for investing

 Interpretation: - In this survey, out of 220 respondents, 19.5% respondents prefer SIP
method for investing, 14.5% respondents prefer Lump sum method while 32.7%
respondents prefer both SIP and Lump sum method as per their choice for investing
and rest 33.2% respondents don’t invest.

 Distribution of respondents according to range of money used for investing

Interpretation: - In this survey, out of 220 respondents, 44.5% respondents prefer to

invest in range of Rs1000 to 5000, 16.4%respondents prefer to invest in range of
Rs5000 to 15000, 7.3% respondents invest in range of Rs15000 to 30000, 7.7%
respondents prefer to invest above Rs30000 and rest 24.1% don’t prefer to invest.

 Opinion of respondents about social media affecting stock market and cryptocurrency
 Interpretation: - In this survey, out of 220 respondents, 47.7% respondents agreed that
social media affects stock market and cryptocurrencies while 24.1% strongly agreed
to this, 23.2% respondents were neutral about this, 4.1% respondents disagreed about
social media affecting stock market and cryptocurrencies while 0.9% strongly
disagreed to this.

 Opinion of respondents who agree and the reason they think affects most

Interpretation:- This is optional question for respondents to know the reason which activity
according to them will affects stock market and cryptocurrencies the most, In this 21.2%
respondents think Stock related news channel affects the most, 9.1% respondents think that
posts or videos on various social media platform affects the most, 9.1% respondents think
that comments from Big investors will affects the most while 60.6% respondents think all the
three activities collectively will affects the most.

 Opinion of respondents about social media, overvaluing stocks and cryptocurrencies

price and increasing volatility in market
Interpretation: - In this survey, out of 220 respondents, 44.5% respondents agreed that social
media is responsible for overvaluing stocks and crypto prices and increasing volatility in
market, 11.4% respondents disagreed to this while rest 44.1% respondents were not sure
whether social media is responsible for increasing prices and volatility or not

 Opinion of respondents whether they prefer to have information about company

through social media or perform own analysis

Interpretation: - In this survey, out of 220 respondents, 44.1% respondents agreed that
they prefer to have information about company on social media rather than doing
fundamental analysis on own before investing while 15% strongly agreed to this,
31.8% respondents were neutral about this, 5.9% respondents disagreed about having
information about company on social media and rest 3.2% strongly disagreed about
this.

 Opinion of respondents whether social media is inspiring people to invest in stocks

and cryptocurrency
 Interpretation: - In this survey, out of 220 respondents, 75.5% respondents believe
that social media is inspiring people to invest in stock market and cryptocurrencies,
6.8% respondents do not believe about this while rest 17.7% respondents were not
sure about this.

Calculation of Chisquare

 Observed data (O) as per google form survey: -

Observe News on social media affects stock Preference of social media news over self
d market analysis Total

Agree 158 130 288

Disagree 11 20 31

Neutral 51 70 121

Total 220 220 440

 Expected data (E) as per google form survey: -

News on Social media affects stock Preference of social media news over self
Expected market analysis
Agree 144 144
Disagree 15.5 15.5
Neutral 60.5 60.5

News on Social media affects stock Preference of social media news over self
(O-E)^2/E market analysis
Agree 1.361111111 1.361111111
Disagree 1.306451613 1.306451613
Neutral 1.491735537 1.491735537
 Chi Square as per formula: -

 Summation of (O-E) ^2/E = 8.318596522

 Value of p is calculated using the Statistical CHISQ.DIST. RT function
 CHISQ.DIST. RT(x,deg_freedom)
 X Required: The value at which you want to evaluate the distribution.
 Degree of freedom Required: (r-1*c-1) where r is the number of rows and c is the
number of columns.

Summation 8.318596522
Degree of freedom 2
Value of p 0.015618514
Alpha value 0.05

HYPOTHESIS TESTING
Chi square test was conducted to assess the significance level at 0.05%. Pearson chi square
significance value is 0.015618514 (p<0.05), therefore we will reject null hypothesis, so we
conclude that “Social media has effect on stock market and cryptocurrency”

RECOMMENDATION

1. Before investing in stocks or cryptocurrencies, one should gain knowledge on how to

perform fundamental analysis on any company/ cryptocurrency
2. Retail investors should read company’s quarterly report in which he has invested to
see how it has performed as compared to its peers.
3. Reports are usually available on companies’ official website and also on SEBI
website.
4. After thoroughly gaining knowledge about company’s fundamentals and current
market scenario, investors should design his own investing strategies.
5. People should not depend on social media, as their primary source of information for
investing in any stocks/cryptocurrency
6. Investors should always look for long term gains rather than going after short term
gains, which are solely driven by sentiments of public opinion that are influenced by
social media platforms.
CONCLUSION
From the research, we learnt that social media has a significant impact in individual’s
decision making. It has the power to influence the general public’s opinion about a lot of
investment plans and thus it plays an important role in investing behaviour mindset of retail
investor
Social media acts as a powerful medium for big organizations to increase their reach and
advertise their services.
Tweets by influential investor regarding particular stocks/crypto leads to rise in the value for
that particular stock/crypto in short span of time, which is possible only because of the power
of social media.
But it should also be noted that social media is not always the best source for credible
information and not every social media page or source could be trusted since they can just be
scams. So always refer to authentic sources before taking any investing decision.

Even though, social media affects stocks and crypto performance in a positive way, it should
be used carefully by influential investors and big organizations to form good relations among
their followers and shareholders.
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