Do Smartphones Transform Information Transmission in Financial Markets? Evidence from StockTwits

Information technologies have dramatically changed the way investors gather, process, and share information. This paper investigates whether smartphones, arguably the most important innovation in recent decades, improve the efficiency of the information set of retail investors. We exploit a pivotal feature of the StockTwits data, which reveals the channel through which a tweet is posted---smartphone versus website. Measuring investors' expectations using bullish and bearish tweets, we find that only the smartphone expectation significantly predicts the next-day stock returns. In addition, its predictive power comes mainly from bullish tweets posted during trading hours, and it is informative about the next-day financial news on corporate financing, marketing, and investor relations. Leveraging text-mining techniques, we provide within-stock-investor-time evidence on the positive effect of smartphone use on tweet informativeness. When using smartphones, investors express their opinions more assertively, use more risk-reward and future-related words, and are more likely to cover topics appearing in future news headlines. Our findings highlight the impact of smartphones on information transmission in financial markets.