Tweeting the Good News: Returns and Price Informativeness

59 Pages Posted: 15 Jul 2017

See all articles by M. Al Guindy

M. Al Guindy

Carleton University - Eric Sprott School of Business

Ryan Riordan

Queen's University - Smith School of Business; Ludwig-Maximilians-University Munich, Faculty of Business Administration (Munich School of Management)

Date Written: July 3, 2017

Abstract

Recent innovations in information technology (Social Media) have made voluntary firm disclosure ubiquitous, cheap, and timely. We study the use of Twitter, and exploit a 2013 regulatory change that makes financial tweeting credible. Consistent with theoretical models, we find that firms release mostly positive information; tweeting days are characterized by high returns not subsequently reversed. Consistent with theories of investor attention, when firms tweet negative information, they select times of low investor attention, such as Fridays or outside of market hours. Finally, tweeting is positively related to firm stock price efficiency, suggesting that firms using Twitter release valuation-relevant information sooner.

Keywords: Social Media, Twitter, Textual Analysis, Investor Attention, Information Asymmetry

JEL Classification: G10, G12, G14

Suggested Citation

Al Guindy, M. and Riordan, Ryan, Tweeting the Good News: Returns and Price Informativeness (July 3, 2017). Available at SSRN: https://ssrn.com/abstract=2999443 or http://dx.doi.org/10.2139/ssrn.2999443

M. Al Guindy (Contact Author)

Carleton University - Eric Sprott School of Business ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S SB6
Canada

Ryan Riordan

Queen's University - Smith School of Business ( email )

Smith School of Business, Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Ludwig-Maximilians-University Munich, Faculty of Business Administration (Munich School of Management) ( email )

Schackstr. 4
Munich, 80539
Germany

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