Value and misinformation in collaborative investing platforms

Abstract

It is often difficult to separate the highly capable "experts" from the average worker in crowdsourced systems. This is especially true for challenge application domains that require extensive domain knowledge. The problem of stock analysis is one such domain, where even the highly paid, well-educated domain experts are prone to make mistakes. As an extremely challenging problem space, the "wisdom of the crowds" property that many crowdsourced applications rely on may not hold. In this article, we study the problem of evaluating and identifying experts in the context of SeekingAlpha and StockTwits, two crowdsourced investment services that have recently begun to encroach on a space dominated for decades by large investment banks. We seek to understand the quality and impact of content on collaborative investment platforms, by empirically analyzing complete datasets of SeekingAlpha articles (9 years) and StockTwits messages (4 years). We develop sentiment analysis tools and correlate contributed content to the historical performance of relevant stocks. While SeekingAlpha articles and StockTwits messages provide minimal correlation to stock performance in aggregate, a subset of experts contribute more valuable (predictive) content. We show that these authors can be easily identified by user interactions, and investments based on their analysis significantly outperform broader markets. This effectively shows that even in challenging application domains, there is a secondary or indirect wisdom of the crowds. Finally, we conduct a user survey that sheds light on users' views of SeekingAlpha content and stock manipulation. We also devote efforts to identify potential manipulation of stocks by detecting authors controlling multiple identities.