Insights from Financial Influencers: Lessons for Retail Traders

1. Skilled Finfluencers: These individuals represent 28% of the sample and are the true gems among finfluencers. Their advice generates an average of 2.6% monthly abnormal returns, indicating that they provide genuinely valuable insights. Skilled finfluencers often tweet less frequently and tend to post data-driven and sometimes negative assessments, which align with their ability to outperform.
   
2. Unskilled Finfluencers: Accounting for 16% of the sample, unskilled finfluencers have little to no impact on returns. Their advice is neither harmful nor particularly beneficial, making them neutral players in the social media finance space. Despite their lack of effectiveness, these influencers still attract some attention due to their activity levels and relatability.
   
3. Antiskilled Finfluencers: Shockingly, 56% of finfluencers fall into this category, making them the majority. Antiskilled influencers consistently provide poor advice, generating an average of -2.3% monthly abnormal returns. Their recommendations often reflect overly optimistic or flawed beliefs, leading followers astray. Despite their negative track record, antiskilled finfluencers tend to have the largest followings and the most influence, driven by behavioral biases such as homophily and their frequent activity on social media.
   

Surprisingly, the study found that unskilled and antiskilled finfluencers have more followers and exert greater influence than their skilled counterparts. This phenomenon is linked to behavioral biases such as homophily—a tendency for people to align with others who share similar opinions, even if those opinions lack merit.

• Popularity Over Precision: Social media rewards engagement and relatability, often sidelining the importance of accuracy.
  
• Behavioral Biases: Retail traders are drawn to familiar or optimistic messages, even when they’re unfounded.
  
• Tweet Frequency: Antiskilled influencers tend to post more frequently, increasing their visibility and perceived authority.
  

Interestingly, the study also found that skilled finfluencers tend to post less frequently and are more likely to share negative but accurate assessments. This trait aligns with their ability to generate better returns but limits their mass appeal.

Similarly, tracking skilled finfluencers who post less often but provide thoughtful analyses can complement this strategy, offering a balanced approach to decision-making.

As the researchers aptly conclude: “The message is more important than the messenger.” In the ever-evolving world of retail trading, this is advice worth heeding.