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April 2, 2013

Twitter increases market liquidity of little-known firms: study

Twitter and other direct access information technologies can assist in reducing the information disadvantage of small firms

By CBR Staff Writer

Posting tweets on Twitter has measurably boosted the market liquidity of little-known firms, according to a new study from Stanford Graduate School of Business.

The study revealed that the micro blogging site seems to assist little-known firms to overcome the natural partiality of conventional news media for bigger firms that are already famous.

According to researchers, including Elizabeth Blankespoor, an assistant professor of accounting at the Stanford Graduate School of Business, tweeting augmented the market liquidity of stocks that remain unnoticed by users.

The study was conducted by researchers including Gregory Miller, an associate professor of accounting at the University of Michigan, and Hal White, an assistant professor of accounting at Michigan.

The researchers found that Twitter is the only direct-access technology in use, while even though several firms opt for mass email alerts, RSS feeds, as well as Facebook to reach investors, Twitter has been the social networking tool of choice.

As part of the research, the researchers collected tweet data from 2007 through September 2009 for 102 information technology companies and linked the tweet activity with trading data regarding the liquidity of stock of each firm.

The research revealed that the average firm in the study had 28,318 followers over the period and firms had sent an average of 46.9 tweets with links every month, with each link being clicked an average of 141 times.

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According to Blankespoor Twitter and other direct access information technologies can help reduce the information disadvantage of small firms.

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