Social Media and Financial News Manipulation

53 Pages Posted: 31 Aug 2018 Last revised: 15 Sep 2021

See all articles by Shimon Kogan

Shimon Kogan

Reichman University - Arison School of Business; University of Pennsylvania - The Wharton School

Tobias J. Moskowitz

AQR Capital; Yale University, Yale SOM; National Bureau of Economic Research (NBER)

Marina Niessner

Indiana University - Kelley School of Business - Department of Finance

Date Written: March 15, 2022

Abstract

We examine an undercover SEC investigation into the manipulation of financial news on social media. While fraudulent news had a direct positive impact on retail trading and prices, revelation of the fraud by the SEC announcement resulted in significantly lower retail trading volume on all news, including legitimate news, on these platforms. For small firms, volume declined by 23.5% and price volatility dropped by 1.3%. We find evidence consistent with concerns of fraud causing the decline in trading activity and price volatility, which we interpret through the lens of social capital, and attempt to rule out alternative explanations. The results highlight the indirect consequences of fraud and its spillover effects that reduce the social network’s impact on information dissemination, especially for small, opaque firms. 

Suggested Citation

Kogan, Shimon and Moskowitz, Tobias J. and Moskowitz, Tobias J. and Niessner, Marina, Social Media and Financial News Manipulation (March 15, 2022). Available at SSRN: https://ssrn.com/abstract=3237763 or http://dx.doi.org/10.2139/ssrn.3237763

Shimon Kogan

Reichman University - Arison School of Business ( email )

P.O. Box 167
Herzliya, 46150
Israel

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Tobias J. Moskowitz

Yale University, Yale SOM ( email )

493 College St
New Haven, CT CT 06520
United States

HOME PAGE: http://som.yale.edu/tobias-j-moskowitz

AQR Capital ( email )

Greenwich, CT
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Marina Niessner (Contact Author)

Indiana University - Kelley School of Business - Department of Finance

1309 E. 10th St
Bloomington, IN 47405
United States

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