Understanding heterogeneity of investor sentiment on social media: A structural topic modeling approach

Abstract

Investors nowadays post heterogeneous sentiments on social media about financial assets based on their trading preferences. However, existing works typically analyze the sentiment by its content only and do not account for investor profiles and trading preferences in different types of assets. This paper explicitly considers how investor sentiment about financial market events is shaped by the relative discussions of different types of investors. We leverage a large-scale financial social media dataset and employ a structural topic modeling approach to extract topical contents of investor sentiment across multiple finance-specific factors. The identified topics reveal important events related to the financial market and show strong heterogeneity in the social media content in terms of compositions of investor profiles, asset categories, and bullish/bearish sentiment. Results show that investors with different profiles and trading preferences tend to discuss financial markets with heterogeneous beliefs, leading to divergent opinions about those events regarding the topic prevalence and proportion. Moreover, our findings may shed light on the mechanism that underlies the efficient investor sentiment extraction and aggregation while considering the heterogeneity of investor sentiment across different dimensions.