Dr. Lin Peng: Social media influence on the stock market
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On social media—where one in five U.S. adults regularly get their news—posts and discussions about investments can spread quickly, shaping investors’ decisions and driving market movements in real time.
On June 10, 2025, SciLine interviewed: Dr. Lin Peng, a professor of finance at the City University of New York. See the footage and transcript from the interview below, or select ‘Contents’ on the left to skip to specific questions.
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Introduction
[0:00:19]
LIN PENG: Hi, my name is Lin Peng. I’m the Krell Chair Professor of Finance at Baruch College, the City University of New York. My specialty is in social finance, which studies the effect of social network and social media on how they shape financial markets.
Interview with SciLine
Why does information spread so quickly on social media?
[0:00:42]
LIN PENG: Yeah, so in today’s markets, social media is incredibly powerful in spreading news and in shaping investor decisions and drive market movements in real time. And the reason is that today, just so many people are glued to social media in the U.S., about 250 million Americans use social media actively, and you know, it has become a prominent source of information for many people. About one in four U.S. adults regularly get their news from social media. So, this, you know, shows you how, you know, what’s the incredible power of social media in shaping how news are disseminated and how that influences people’s beliefs and opinions.
What role does social media play in driving stock market movements?
[0:01:36]
LIN PENG: So, actually, social media can play both the good and the bad. So, the good role is that there are a lot of useful information that’s actually disseminated on social media. So, for example, you could have a stock that has not received much attention from investors, or a small company that lacks the resources to hire like a big investor relation team to work on, you know, marketing their information. But now with social media, such companies can just, you know, use Twitter or X to broadcast their news, and that really reduce substantially, reduces the cost of information dissemination. And also, for the investors, you know, when you think about individual investors, they don’t have the money to buy a writers or Bloomberg in their house, right? But now, with social media, they can receive a lot of this valuable news again, at their fingertips. So that’s kind of the good side of social media. But of course, there’s also the other side of, you know, quote, unquote, the dark side of social media that, you know, there could be misinformation. There could be information that spread on social media that kind of triggered investors, you know, behavioral bias, meaning they receive information, and they make the wrong decisions that could reduce the efficiency of markets.
How does misinformation shared online lead to market fluctuations and price bubbles?
[0:03:06]
LIN PENG: Many people believe that, indeed, the markets are getting more volatile. Currently, compared to say, like, you know, 30 years ago, and you know, a main contributor to that speculation, to that volatility, is indeed because of social media that generated a lot of investor interest, that could amplify the mistakes or the biases that you could be making that generates all this volatility.
What does your research reveal about the relationship between social media activity and stock market reactions?
[0:03:44]
LIN PENG: So, I’ve actually working on multiple projects looking at exactly asking the question under, you know, how does social media activities influence markets, and under what circumstances that social media can serve the beneficial role, and what are the circumstances social media could lead to amplification of biases and efficiency. So, we find that, for example, that when firm makes earnings announcement, you know, without social media or like, you know, if the firm is located in places where it’s not so well connected the information, you know, it takes longer for the information to incorporate into the prices. But for the more, more kind of connected firms, information gets incorporated into prices much faster. So that’s an example where, you know, companies can use the power of social media to disseminate valuable information to investors, and investors receiving that information, they can act on that information and that, you know, they can make the right investment choices. But also, we’ve identified settings where social media could amplify investors biases. Example, individual investors turn to, or some of the individual investors, they have this tendency of attracted to stocks that’s behave like a lottery. So, the stocks that you know have, you know, investors believe they can make them, you know, overnight millionaires like these stocks, typically, price can run up, you know, 500 for example, 500% over the one day. So, we find that social media activities, for example, you know, intense discussions on stock to it will amplify investors attraction to such stocks, and they end up buying more than they should of such stocks, and the stocks gets overvalued, and in the long run, investors tend to be disappointed. So, you see kind of these episodes from meme stocks, from familiar names like, you know, GameStop, AMC, and some of the crypto assets or options.
How is financial information typically shared and amplified on social media platforms?
[0:06:02]
LIN PENG: Yeah, so there are several venues, as I mentioned earlier, companies can use X or other social media to spread their information, you know, their earnings or any important value relevant information the company has. And investors can also share and discuss information online, and there are several prominent social media sites like Stocktwits, like Reddit and Seeking Alpha. And so there are some difference, important differences, across these different social media sites that’s specific for investment purposes, and even on the same social media sites. For example, my research has shown that even also a Stocktwits website—depending on the different type of investors, depends on the strategies they use—their posts could be informative, they could be noise, or sometimes they could be completely wrong. So, investors need to be careful which social media site they pay attention to, and whose posts they’re they’re looking at.
What are some tips for navigating investment advice found on social media?
[0:07:11]
LIN PENG: Yeah. So, for example, we find that on Stocktwits, mostly longer-term authors, and the posts that discuss fundamental information, such as firms’ valuations, such as, you know, important like earnings, such as discussing analyst forecast—those posts turn to be more likely to be informative. On the other hand, the posts that talk about, you know, charts, like price patterns, head and shoulders, those kind of technical signal related posts, they seem to be often wrong then right.
How can people use social media positively and effectively for investment advice?
[0:07:56]
LIN PENG: Obviously, we’ve talked about some of the dark side of social media that one needs to be very careful. But there is also enormous power in social media that we could take advantage of, right? So, for example, if you are, if a creator, if you have, you know, fascinating new video game, or if you have a like art project you want, you know, launch your project on Kickstarter, make sure you use social media, broadcast that to your social media friends, ask them to retweet about their support. So, in one of my papers, we show that it has, you know, powerful in terms of getting, you know, getting successful funding for this kind of social—for these kinds of crowd founding campaigns. And similarly, we also show another paper that we looked at, we look at online lending activities, so we show that social media can help, especially the disadvantaged populations, like areas with low income, you know, on average, bad FICO credit. But to social media, that kind of information can help people in from this area to have better access to online credit availability, and that seems to improve both the screening as well as outcomes.
