Veljko

Study Suggests Financial Bloggers May Move Markets

Dear Mr. Hoffmann and Seeking Alpha community,
Thank you very much for your kind feedback.
I try not to comment on my own research, as I think it is for the reader to judge its merits, or lack of.
But I feel compelled to make an exception in this case. I have to apologize in case I failed to make this clear, but the sample used in gauging market reaction was controlled for contemporaneous news. As stated in the “Data Sources” section, I use two news databases, Factiva and Lexis-Nexis, to control for all firm-specific news items appearing on either Dow-Jones Newswires or on The Wall Street Journal on the interval between day -1 (the day preceding blog publication) and day +1 (the day following blog publication). In addition, I excluded all instances in which other blog posts were published during the same time interval. Also, I exclude all instances in which the firm posted earning reports (although those are, in the great majority of cases, reported by Dow-Jones Newswires). As stated and as indicated in the tables, these restrictions reduce my final sample to 208 observations from the original 500. Results are reported for both subsets. The evidence I offer in support of market reactions is based on the reduced sample and so are the quoted results.
The first statement you quote "Bloggers do appear, for the most part, to echo information already available in the media:” is based on observing that only 208 observations report novel information.
While I do appreciate the interest that the blogging community has so far shown, I wish to make clear that this is a preliminary study, which I consider a starting point for a larger project. In particular, I am currently working on dramatically expanding my sample size by using web-crawling algorithms to automate data collection. In addition, the revised version of the paper will contain a discussion on the relationship between market reaction and past performance of bloggers; I hope to be able to establish that markets react more to bloggers who have a better “track record”, defined by the accuracy of their past predictions (I define an accurate recommendation as one which correctly anticipated the sign of the subsequent long-term abnormal return; for example, a long recommendation followed by a subsequent price increase).
Once more, please allow me to thank you for taking the time to review my research and to offer your feedback. Thanks also to Seeking Alpha for the wonderful job done in tracking the evolution of the financial blogging community.

A quick note: the opinions here expressed are mine and do not necessarily reflect those of Price College or of the University of Oklahoma .

Regards,
Veljko Fotak
[e-mail]