The recent mania of Reddit darling GameStop raises questions about social media’s impact on the behaviours of institutional investors such as mutual funds. We examine whether and why mutual funds hold “sentimental” stocks that are heavily mentioned or with bullish views on social media....

We build a corpus of over 5½ million news articles on 20 large US firms over the 10-year period from January 2001 to December 2010, and use it to study the time-varying nature of the relation between media-expressed firm-specific tone and firm-level returns. By estimating a series of separate...

We find that media tone reflects firm-level expected returns — firms with low-negative tone stories over a few months earn higher returns in the medium to long term than do firms with high-negative tone stories. The tone premium is driven by consistent outperformance of low-negative stocks,...