Luxury Connoisseurs and Twitter: An Empirical Study of Relationship between Volume of tweets from Luxury Brands and their Stock Price Returns in the US

The world’s financial communities take a huge interest in luxury brands, and financial markets are attracted to them. In today’s Web 2.0 climate, characterized by user-generated content (UGC) and social networking sites (SNS) such as Twitter, luxury brands are utilizing Twitter to attract loyal as well as aspirational consumers. This study investigates the effect of marketers’ use of Twitter on the stock prices of luxury brands. Using stock return response modeling, this study fits three regression models that use tweet volume from luxury brands, retweet volume of brands’ tweets, and their ratio to predict the variability in their stock price returns, after accounting for market returns. The results show that there are negative correlations among Twitter variables and stock returns of luxury brands, after accounting for market returns. The research findings have implications for advancing the understanding of the link between social media marketing and financial interface.JEL codes: M30, M31