Social Media, News Media and the Stock Market

50 Pages Posted: 2 Apr 2016 Last revised: 3 Oct 2018

See all articles by Peiran Jiao

Peiran Jiao

Maastricht University - Department of Finance

Andre Veiga

Imperial College London

Ansgar Walther

University of Warwick - Warwick Business School

Date Written: September 25, 2018

Abstract

We study the effect on stock volatility and turnover of coverage by traditional news media and social media. We find that coverage by traditional news media predicts decreases in subsequent volatility and turnover, but coverage by social media predicts increases in volatility and turnover. These patterns are inconsistent with rational models where social and news media both convey information. We show that they are consistent with a model of “echo chambers”, where social networks repeat news, but some investors interpret repeated signals as genuinely new information.

JEL Classification: G02, G12, G14

Suggested Citation

Jiao, Peiran and Veiga, Andre and Walther, Ansgar, Social Media, News Media and the Stock Market (September 25, 2018). Available at SSRN: https://ssrn.com/abstract=2755933 or http://dx.doi.org/10.2139/ssrn.2755933

Peiran Jiao

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

Andre Veiga (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Ansgar Walther

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

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