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Political News and Stock Prices: Evidence from Trump’s Trade War

Forthcoming, Applied Economics Letters

6 Pages Posted: 12 Nov 2019

See all articles by Ralf Fendel

Ralf Fendel

WHU Otto Beisheim Graduate School of Management

Tobias Burggraf

WHU - Otto Beisheim School of Management

Toan Luu Duc Huynh

Ho Chi Minh City University of Economics and Finance; WHU - Otto Beisheim School of Management

Date Written: October 28, 2019

Abstract

This study investigates the impact of political news on stock price movements. Analyzing more than 3,200 tweets from US President Donald Trump’s Twitter account, we find that tweets related to the US-China trade war negatively predict S&P 500 returns and positively predict VIX. Granger causality estimates indicate that the causal relationship is one-directional – from Trump tweets to returns and VIX. Finally, the results vary across industries depending on their degree of trade intensity with China.

Keywords: Granger causality, Political news, Trump, Twitter, Trade war

JEL Classification: F1, F4, G1

Suggested Citation

Fendel, Ralf and Burggraf, Tobias and Huynh, Toan Luu Duc, Political News and Stock Prices: Evidence from Trump’s Trade War (October 28, 2019). Forthcoming, Applied Economics Letters, Available at SSRN: https://ssrn.com/abstract=3479822

Ralf Fendel

WHU Otto Beisheim Graduate School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Tobias Burggraf

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Toan Luu Duc Huynh (Contact Author)

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

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