The popularity of big brands on Facebook, Twitter and YouTube may predict stock prices ten and thirty days later, according to a study at Pace University in New York City.
The research analyzed data over ten months—from April, 2010 to February 2011—for Starbucks, Coca Cola and Nike, comparing their daily stock price movements against data provided by Famecount.com, a social media analytics firm. “We were able to reliably predict daily stock prices over a 10 month period – during which the stocks of the companies experienced radically different returns, with Starbucks climbing 29%, Nike appreciating by 14%, and yet Coke declining by nearly 6% – even when the social media data was lagged by as much as 30 days, said study author Arthur J. O’Connor, an IT management consultant working in the financial services industry enrolled in the executive doctoral program in business at Pace.
On Facebook, social media watchers were skeptical. Matthew Grabowski in Seattle points out that the companies began acquiring new fans at the same time as the stock markets moved up. Brant Emery, a brand marketing and communications specialist in Amsterdam, agreed.
If the result holds, stocks to watch include Wal-Mart, Viacom, and Sony, three brands that have been grabbing attention on the big social networks, according to Famecount.com.
Wal-Mart, for example, asked Facebook users to choose where the company should donate $1.5 million to organizations fighting hunger. The campaign generated more than 10 million Facebook “Likes,” Wal-Mart says.
Other brands are using social media aggressively.
Saab is letting their Facebook fans create and star in their own Saab web banners. Paramount Pictures launched its Super 8 movie trailer on Twitter and Facebook And American Express is debuting a new interactive tool that links customers’ American Express cards to their Foursquare accounts to receive deals and offers from over 50 participating vendors.
Future research at Pace will analyze the relationship between the Famecount.com data and stock prices for more consumer brands and possible links between social media popularity and other financial data.