How Many Words is a Picture Worth? Using Emojis from Social Media to Predict Future Stock Returns
Published in Working Paper, 2023
Using a new and comprehensive sample of more than 87 million Twitter posts referencing Russell 3000 firms between 2012 and 2022, we introduce a novel, unsupervised method of scoring the sentiment of emojis. Our method generates point-in-time dictionaries that map individual emojis to the contextual sentiment of recent tweets that contain them. In out-of-sample tests, we find that even controlling for the sentiment extracted from words, news, and corporate events, emoji sentiment correctly predicts future firm-level stock returns. Importantly, we show a newly emergent generation of Twitter users drive emoji-based return predictability, while more experienced users better predict returns using words. Understanding the sentiment of emojis has become increasingly important as individuals and market professionals continue to adopt these new forms of communication.
Recommended citation: Fox, Corbin, Eric K. Kelley, and Roman Paolucci. "How Many Words is a Picture Worth? Using Emojis from Social Media to Predict Future Stock Returns." Using Emojis from Social Media to Predict Future Stock Returns (March 15, 2023) (2023).
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