THE INFLUENCE OF ONLINE COMMUNITIES, eWOM & UGC - A NON-PROFESSIONAL INVESTOR PERSPECTIVE

Abstract: During 2020, online brokers experienced an increase in people who began to invest their money on the stock market. This, because covid-19 made people realize that they needed an economic buffer in difficult times. Moreover, the stock market declined in the beginning of 2020 due to the pandemic which made people see the chance to make profits. Simultaneously, it was evident that the social media usage surged due to covid-19 as people could not meet each other psychically, which resulted in them using social media to interact. In the beginning of 2021, two events occurred in which investors made decisions based on turmoil on social media, which had tremendous effects on investors and the financial market as a whole. These events depicted how financial markets and social media are interrelated, which was interesting for us as we have specialized in finance and marketing respectively. Evidently, research merging these two areas is scarce which motivated us to explore how social media and its mechanisms affect investors when making investment decisions. From the above mentioned events, it could be seen that certain stocks were hyped within online communities, such as Twitter and Reddit. Subsequently, we deemed that it would be interesting to investigate how investors are influenced by online communities. Moreover, it appeared as if investors adhered to the large mass rather than the information that others expressed. Hence, we deemed that we would investigate online communities, electronic word-of-mouth (eWOM) and user-generated content (UGC). The main purpose of this thesis was to gain a deeper understanding of how social media influences, i.e. online communities, eWOM and UGC, affect non-professional investors’ investment decisions. By examining theories of investment decisions, we explored how investors act and also which factors that influence them in their decision-making process. The second area framed both the features and the power of online communities, eWOM and UGC which influence social media users. We performed a qualitative study to examine the mindset of nonprofessional investors and to investigate how they related to and acted upon the quick and accessible information produced online regarding firms and their activities. By our research, we aimed to provide insights on how marketing and finance affect one another, especially in the wake of the rapidly developing digital environment where information sharing on social media is taking new heights. This research was performed by using a qualitative study, in which semi-structured interviews were conducted to get a broader comprehension of the behaviour that investors adopt. The participants of our study consisted of non-professional investors, as we deemed the professional investors to be less adherent to external noise. Using the data from the interviews, we conducted a thematic analysis which resulted in specific themes related to areas of investment decisions, online communities and eWOM/UGC. The findings suggest that investors are affected by online communities, eWOM and UGC although mainly for inspiration, knowledge and information. Hence, our findings signify that investors use them to widen their knowledge and find new companies and sectors to invest in. Concurrently, investors highlight the importance of making their own analysis and research before making a final decision, which signifies that eWOM and UGC do not have a direct impact on investors.