The Impact of Social Media Upon Investment Decisions

Abstract

With more and more people turning to social media platforms for news, advice, and events, social media has a significant impact upon the decisions that people make when investing. Behavioral finance can provide important principles and clues to better understand the psychology behind why people make the investment decisions that they do. This paper begins with a review of the foundational principles of behavioral finance with great emphasis on those that will be studied in greater detail in this thesis and those that relate specifically to social media. This is followed by a literature review of current research being done over the correlation between social media, social interaction, and investment decisions. I conducted a study to further understand this correlation of these two fields and determine how people perceive the stock market when using social media as their primary resource. Some of the topics studied include social media’s influence on BUY vs. SELL decisions, whether or not investors fact check investment news, and how social media influences novice vs. sophisticated investors. Most of my results confirmed my hypothesis, current research, and significant behavioral finance principles.