With global stock markets ping-ponging back and forth these days over political instability in North Africa and the Middle East, escalating food prices and a near-nuclear meltdown in Japan we cannot resist adding yet another variable to the stock-watching puzzle: a company’s online popularity.

A new piece of research looking at the relationship between online buzz for a brand and share price performance has concluded something that should make traders everywhere take notice: yes, there’s a correlation between a brand’s online popularity and share price performance. The study was conducted by Arthur O’Connor, a doctoral student at Pace University in New York with asssistance from London-based Famecount.

O’Connor looked at the share price performance of three of the most popular brands on Facebook, Twitter and YouTube – Starbucks, Coca Cola and Nike – over a 10-month span. He concluded that there is “statistically significant correlation” between rising popularity and a rising share price. And, in a conclusion that should attract the geekiest of traders, the study notes:

Furthermore, this correlation was also found when a ten, and a thirty day lag was introduced into the study, suggesting that social media popularity may be a lead indicator of stock price performance.

O’Connor points out that while his findings revealed the importance of a sustained escalation in the number of likes, follows and friends for a brand, he didn’t have enough detail to predict what a swarm of bad news could do for a company’s share price.

That’s where a second bit of research may come in. Earlier this month, European law firm Olswang LLP sent us the findings of a survey they conducted with the CEOs of 40 AIM listed companies.

The Olswang survey found that 43% of the AIM firms had been the victims of untrue allegations or rumors posted online, usually anonymously. While the survey did not discuss share price impact, it did note that these small- and mid-sized listed firms treated  the statements seriously, often working to get them removed for fear it would permanently sink their reputation. As a result, 60% are actively monitoring their online reputations through PR agencies or specialist monitoring companies, and
30% of those surveyed said they are now using social media as part of their PR and marketing strategies.

Food for thought for the Investor Relations team.