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May 11, 2023 | The Loudest, Least-Skilled Financial Influencers are Most Followed

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

A paper from the Swiss Finance Institute‘s working paper series tracked data from more than 29,000 finfluencers on financial social media site StockTwits and came to some predictable conclusions. Those with the least skill tend to be the most followed. The democratization of finance? Not so much; see, Investors flock to loudest, least skilled voices on social media, finds research:

“Social media has gained great importance in recent years for sharing and acquiring information,” the paper stated.

“An important question is whether competition among users of social media platforms is such that followers can easily identify skilled […] finfluencers and drive out unskilled finfluencers from the market for social information. We find that the answer is no.”

The researchers — from the University of California, Berkeley, Rice University and the University of Lausanne — found that finfluencers who provided the worst advice were the most active and had the greatest following.

…skill was “effectively ignored” when it came to influence. Skilled finfluencers were less active and also tended to take more negative positions. The anti-skilled most often created overly optimistic beliefs.

“Surprisingly, unskilled and anti-skilled finfluencers have more followers, more activity, and more influence on retail trading than skilled finfluencers,” the paper said.

Now add that even those with the education and experience to be actual experts most often work for firms that sell long-always investment products and portfolios. Hence, why so few offer valuable financial insight and management services. And the few who do tend not to attract the masses. Word.

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May 11th, 2023

Posted In: Juggling Dynamite

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