An in-depth analysis of the implications of social media usage on retail investors

Abstract

Social media use has expanded significantly ever since it was originally established. People started using these social platforms to share their personal experiences on several matters of life. Recently, it has also become a norm to share financial investment experiences on social media. There are advantages in doing so and in fact, social media has helped grow financial markets by introducing millions of new investors every year. However, this growth coming from social media has its cons as well since the idea of market manipulation has evolved and investors are becoming less rational and more biased. This study understands how social media helps investors, particularly Maltese residents, when making an investment decision. This paper analyses the risks and benefits of using social media for obtaining investment advice and sharing experiences on these online networking platforms. In addition, the research gets quantitative insight about who finds social media the most useful, as well as how Maltese resident investors classify social media against alternative sources of information to make their investment decisions. Finally, the study concludes by providing solutions on what is the best approach for social media to remain helpful while at the same time mitigates some of the detrimental risks it brings with it.