Modeling the impact of YouTube influencers on stock market dynamics

Social media has become a central channel of information for the disciplined investors, YouTube especially occupies a particular place thanks to the visibility and the supposed credibility of the content creators. In a series of recent cases, videos spread by well known influencers have drawn much attention from market participants, which have been followed by discernible changes in trading behavior. While such occurrences do not firmly prove causality to be the case, they certainly do provoke curiosity as to the mechanisms through which online influence can result in financial behaviour. In this manuscript we describe a simple compartmental mathematical model aimed to question the power that YouTube personalities have in the stock-market dynamic. Investors are divided into three groups: one group is initially insulated from being aware of the content, another group is engaged watching the content and considering it, and the third group is reacting to the content by changing their trade positions. The interrelationships of these cohorts are captured in a system of nonlinear ordinary differential equations, using paradigms of diffusion that were historically used in epidemiology and marketing research. We carry out an in-depth exploration of the model, focusing upon equilibrium points and associated stability features of the model. We ran a number of numerical simulations to investigate what would occur. They reveal that market flows triggered by influencers tend to be short-lived, although they may last longer when there is high engagement or weak turnover of investors. That is, although these shifts based on influencers are not long-lasting, they may still remain under circumstances of high involvement or low turnover of investors. Thus this theoretical framework will provide a brief but important outlook on the possibility of how digital contributions can influence the behavior of trading.