Real-Time Diffusion of Information on Twitter and the Financial Markets

Tafti A, Zotti R, Jank W (2016) Real-Time Diffusion of Information on Twitter and the Financial Markets. PLoS ONE 11(8): e0159226, DOI: 10.1371/journal.pone.0159226

29 Pages Posted: 20 Dec 2015 Last revised: 21 Sep 2016

See all articles by Ali R. Tafti

Ali R. Tafti

University of Illinois at Chicago

Ryan Zotti

Capital One Financial Corporation

Wolfgang Jank

University of Maryland - Decision and Information Technologies Department

Date Written: December 18, 2015

Abstract

Do spikes in Twitter chatter about specific firms precede unusual stock market trading activity for those firms, within a resolution of ten to forty minutes? If so, Twitter activity may provide useful information about impending financial market activity in real-time. We study the real-time relationship between chatter on Twitter and the stock trading activity of 96 firms listed in the Nasdaq 100, during 193 days of trading in the period from May 21, 2012 to September 18, 2013. We adopted a quasi-experimental design, in which we identified observations featuring firm-specific spikes in Twitter activity, and randomly assigned each observation to a ten-minute increment matching on the firm and a number of repeating time indicators. We examine the extent that unusual levels of chatter on Twitter about a firm portend an oncoming surge of trading of its stock within the hour, over and above what would normally be expected for the stock for that time of day and day of week. We also compare the findings from our explanatory model to the predictive power of Tweets. Our results suggest that, through monitoring of chatter on Twitter about firms listed on the Nasdaq 100, identifying firm-specific spikes in Twitter activity affords a non-trivial degree of foresight into oncoming surges in trading volume.

Suggested Citation

Tafti, Ali R. and Zotti, Ryan and Jank, Wolfgang, Real-Time Diffusion of Information on Twitter and the Financial Markets (December 18, 2015). Tafti A, Zotti R, Jank W (2016) Real-Time Diffusion of Information on Twitter and the Financial Markets. PLoS ONE 11(8): e0159226, DOI: 10.1371/journal.pone.0159226 . Available at SSRN: https://ssrn.com/abstract=2705621 or http://dx.doi.org/10.2139/ssrn.2705621

Ali R. Tafti (Contact Author)

University of Illinois at Chicago ( email )

601 S Morgan St, 2403 University Hall, MC 294
Chicago, IL 60607
United States

Ryan Zotti

Capital One Financial Corporation ( email )

100 East Shore Drive
Glen Allen, VA 23059
United States

Wolfgang Jank

University of Maryland - Decision and Information Technologies Department ( email )

Robert H. Smith School of Business
4300 Van Munching Hall
College Park, MD 20742
United States
301-405-1118 (Phone)

HOME PAGE: http://www.smith.umd.edu/faculty/wjank/

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