Are finfluencers the new experts in the field of investment advice?

Abstract

The objective of this paper is to research to what extent finfluencers could be regarded as experts fulfilling the role of information intermediaries that contribute to an efficient market. To test this, a hand-collected dataset consisting of finfluencer recommendations was used to conduct an event study in the short and long-run. A distinction was also made between stocks and crypto’s. The results show that, on average, all stocks within the event window [-10, +10] yield a significant CAAR of -3.291%, implying that finfluencers cannot be regarded as experts in the short-run. The long-run BHAR was negative, however, insignificant. Based upon this and the fact that finfluencers often do not possess a license to give financial advice and recommend risky investments, we urge the AFM to regulate more rigorously so that inexperienced investors are protected from taking excessive risks.