Brands With Social Stock

There’s a statistically significant correlation between the social media popularity of key brands and their respective share prices, according to a new study conducted by a researcher at Pace University in association with Famecount.com, writes Mark Terry.

In addition, the correlation remained when 10-, and a 30-day lags were introduced, suggesting that social media popularity may be a lead indicator of stock price performance.

The study analysed data over a 10-month period from April 2010 to February 2011, focussing on three of the most popular brands on social networks – Starbucks, Coca-Cola and Nike – and looking at the daily movements in popularity for each company’s major social network accounts at three of the most popular services: Facebook, Twitter and YouTube.

“By using social network popularity data on three major consumer brands, we were able to reliably predict their respective 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,” says Arthur O’Connor, author of the study.

And, if the correlation holds, the stocks to watch include Walmart, Viacom and Sony, each of which have seen major recent growth in key social media profiles.

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