A modern take on market efficiency: the impact of Trump’s tweets on financial markets

  • We focus on the role of social media as a high-frequency, unfiltered mass information transmission channel and how its use for government communication affects the aggregate stock markets. To measure this effect, we concentrate on one of the most prominent Twitter users, the 45th President of the United States, Donald J. Trump. We analyze around 1,400 of his tweets related to the US economy and classify them by topic and textual sentiment using machine learning algorithms. We investigate whether the tweets contain relevant information for financial markets, i.e. whether they affect market returns, volatility, and trading volumes. Using high-frequency data, we find that Trump’s tweets are most often a reaction to pre-existing market trends and therefore do not provide material new information that would influence prices or trading. We show that past market information can help predict Trump’s decision to tweet about the economy.

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Author:Farshid Abdi, Emily Kormanyos, Loriana PelizzonORCiDGND, Mila Getmansky, Zorka Simon
URN:urn:nbn:de:hebis:30:3-591560
DOI:https://doi.org/10.2139/ssrn.3840203
Parent Title (English):SAFE working paper ; No. 314
Series (Serial Number):SAFE working paper series (314)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2021
Year of first Publication:2021
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2021/07/30
Tag:ETFs; High-frequency event study; Machine learning; Market efficiency; Social media; Twitter
Issue:May 10, 2021
Page Number:70
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht