Collective Sentiment: How Much Influence Do Financial Influencers Have?

IPOs of companies endorsed by bloggers specializing in finance and investment—so-called “finfluencers”—show more significant share price growth from the first day of trading. This was revealed by a special study of the Indian IPO market conducted by researchers at Manipal University in Bangalore.

They analyzed 395 posts by Indian companies from 2014 to 2024. Of these, 99 were directly recommended by local finance influencers on the social media platform X (then known as Twitter).

First, the researchers divided the dynamics of stock prices after an IPO into two parts. The first part consisted of movements driven by voluntary underpricing—when a company sets share prices below their fair market value while still preparing for the start of trading. Price movements in this group typically do not depend on financial influencers; rather, they are explained by the company’s financial metrics and the fact that it was undervalued at the time of the IPO.

The second component is market underpricing, in which a rise in a stock’s price is driven by investor behavior. It turned out that high returns and price increases on the first day of trading driven by this factor were often attributable to retail investor sentiment and speculative trading.

To understand how significantly these sentiments can “drive” stock prices, the study’s authors categorized finfluencers into macro-, mid-, and micro-bloggers based on their audience reach. It turned out that under the influence of macro-finfluencers, market underpricing—prior to the IPO—averages 50%, share prices rise by approximately 30% on the first day of trading, and by 35% after 180 days.

As expected, the impact of mid- and micro-influencers turned out to be less significant. In the first few days of trading, the impact may be moderately positive, but over a 7–30-day horizon, the average return on stocks turns negative—by an average of 3–7%.

Researchers view the attention paid to finfluencers as a new factor influencing asset prices. The correlation is direct: the more likes, reposts, and comments a blogger’s social media posts receive, the wider the gap between the opening price and the closing price on the first day of trading, they concluded.

Retail investors are simply unable to thoroughly analyze every prospectus—human cognitive resources are limited, and these documents are usually quite lengthy. Finance influencers do some of this work for them: they break down the numbers in their posts and videos and offer forecasts. They also use emotionally charged language to create a sense of urgency and the fear of missing out.

At the same time, the number of views on a post or video, as well as likes, reposts, and comments, seem to immediately catch investors’ attention—these SMM metrics serve as social proof of a blogger’s credibility and respectability. As a result, the investor’s focus shifts from evaluating the business to the narrative, the story. At the same time, researchers from India have shown that assessments by professional analysts lose their significance for ordinary retail investors. These assessments are dispassionate and often describe a company using complex financial jargon. As a result, the narrative supplants fundamental indicators.

India is a unique market, as the authors of the study themselves acknowledge. Here, financial influencers (and their influence) are very prominent, primarily because retail investors dominate the market.

Under the rules of India’s regulatory authority, approximately 35% of the total IPO volume is allocated to ordinary retail investors. Another 15% goes to high-net-worth retail investors. In the event of oversubscription, shares in the retail segment are allocated through a computerized lottery, in which each application counts as one “ticket,” regardless of the number of lots requested. Winners receive one lot each, and the remaining shares are distributed proportionally among them, based on the initial size of their applications.

In Europe and the U.S., financial influencers cannot have such a significant impact on stock prices during an offering. The reason is that retail investors are allocated only 5–10% of the shares offered in large IPOs, according to a previous estimate by the Financial Times. Institutional investors call the shots in these markets. It is based on demand from these investors that underwriters set the price range and use as a guide during roadshows and so on.

However, researchers at the Cologne Institute for Information Systems, after analyzing 80 million posts about stocks and cryptocurrencies on Seeking Alpha, as well as on Reddit, X, and other social media platforms, found that posts and content from financial influencers can shape retail investors’ sentiment in the short term. However, no reverse effect was observed. The effect is stronger for crypto assets than for stocks and intensifies during periods of high market uncertainty. The study’s authors tested the hypothesis that the link between influencers’ posts and investor behavior might be random and found that the probability of this is less than 5%. In other words, they conclude that the influence of financial influencers exists and is statistically significant.

The authors refer to this effect as “crowd sentiment”—the collective opinion and emotional state conveyed through social media posts, which often reflects attitudes toward specific assets. In other words, opinion leaders set the emotional tone, and crowd sentiment then spreads it throughout the market.

Every investor is susceptible to cognitive biases, herd behavior, and emotions. Therefore, it is unlikely that anyone will be able to completely shield themselves from the influence of financial influencers.

That said, collective sentiment can be a useful source of market signals. And the experience with meme stocks in the U.S. in 2021 (as well as in 2025) showed that it can even influence institutional investors.

The European Parliament, however, warns that: financial influencers create an environment with high risks of hidden advertising and conflicts of interest, and may mislead the public, which could lead to fraud, including deepfakes created using artificial intelligence. Therefore, in April of this year, MEPs called for the establishment of minimum standards for financial communications on social media.

For now, however, a general conclusion suggests itself: the market frenzy, against the backdrop of the active influence of financial influencers, serves at the very least as a warning sign of potential risks that security prices may diverge from their fundamental indicators.

This article was AI-translated and verified by a human editor