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Is All that Twitters Gold? Social Media Attention, Stock Returns, and the Spread of Information

78 Pages Posted: 1 Aug 2017 Last revised: 18 Dec 2017

David A. Rakowski

University of Texas at Arlington

Sara Shirley

Middle Tennessee State University

Jeffrey Stark

Middle Tennessee State University

Date Written: December 17, 2017

Abstract

Measures of information traditionally arise from curated, professional sources such as newspapers, analyst coverage, earnings announcements, and business news wires. We utilize a new measure, Twitter activity, to examine the impact of information shared by individuals. A natural experiment capturing exogenous Twitter outages allows us to distinguish attention generated through Twitter from other information sources. Increases in Twitter activity are associated with greater trading volume, positive abnormal returns, and, when occurring in conjunction with traditional information supply events, a large and permanent price impact. Our results identify conditions under which information shared by individuals drive price discovery and trading activity.

Keywords: Twitter, Investor Attention, Social Media, Behavioral Finance, Asset Pricing, Spread of Information

JEL Classification: G10, G12, G14, G23

Suggested Citation

Rakowski, David A. and Shirley, Sara and Stark, Jeffrey, Is All that Twitters Gold? Social Media Attention, Stock Returns, and the Spread of Information (December 17, 2017). Available at SSRN: https://ssrn.com/abstract=3010915 or http://dx.doi.org/10.2139/ssrn.3010915

David A. Rakowski

University of Texas at Arlington ( email )

Box 19449 UTA
Arlington, TX 76019
United States

Sara Shirley

Middle Tennessee State University ( email )

Murfreesboro, TN 37132
United States

Jeffrey Stark (Contact Author)

Middle Tennessee State University ( email )

Murfreesboro, TN
United States

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