The President Reacts to News Channel of Government Communication

70 Pages Posted: 6 May 2021 Last revised: 4 Aug 2022

See all articles by Farshid Abdi

Farshid Abdi

University of Massachusetts Amherst

Emily Kormanyos

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration

Mila Getmansky Sherman

University of Massachusetts at Amherst - Eugene M. Isenberg School of Management - Department of Finance

Zorka Simon

Leibniz Institute for Financial Research SAFE

Date Written: August 02, 2022

Abstract

Studying about 1,200 economy-related tweets of President Trump, we establish the “President reacts to news” channel of stock returns. Using high-frequency identification of market movements and machine learning to classify the topics and textual sentiment of tweets, we address the observed heterogeneity in the aggregate stock market response to these messages. After controlling for market trends preceding tweets, we find that 80% of tweets are reactive and predictable rather than novel and informative. The exceptions are trade war tweets, where the President has direct policy authority, and his tweets can reveal investable private information or information about his policy function.

Keywords: Government communication, Social media, Twitter, Machine learning, ETFs

JEL Classification: G10, G14, C58

Suggested Citation

Abdi, Farshid and Kormanyos, Emily and Pelizzon, Loriana and Getmansky Sherman, Mila and Simon, Zorka, The President Reacts to News Channel of Government Communication (August 02, 2022). SAFE Working Paper No. 314, Available at SSRN: https://ssrn.com/abstract=3840203 or http://dx.doi.org/10.2139/ssrn.3840203

Farshid Abdi

University of Massachusetts Amherst ( email )

121 Presidents Drive
Amherst, MA 01003-4910
United States

HOME PAGE: http://farshidabdi.net/

Emily Kormanyos

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, D-60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, D-60323
Germany

Mila Getmansky Sherman

University of Massachusetts at Amherst - Eugene M. Isenberg School of Management - Department of Finance ( email )

Amherst, MA 01003-4910
United States

Zorka Simon (Contact Author)

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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