Market Impact of Government Communication: The Case of Presidential Tweets

86 Pages Posted: 6 May 2021 Last revised: 6 Oct 2021

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; Leibniz Institute for Financial Research SAFE; Ca Foscari University of Venice

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: September 27, 2021

Abstract

We propose the “President reacts to news” channel of stock returns by studying the financial market impact of the Twitter account of the 45th president of the United States, Donald Trump. We use machine learning algorithms to classify topic and textual sentiment of 1,400 economy-related tweets to investigate whether they contain relevant information for financial markets. Analyzing high-frequency data, we find that after controlling for past market movements, most tweets are reactive and predictable, rather than novel and informative. The exceptions are tweet topics where the president has direct policy authority and his negative sentiment could adversely affect economic outcomes.

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 Pelizzon, Loriana and Getmansky Sherman, Mila and Simon, Zorka, Market Impact of Government Communication: The Case of Presidential Tweets (September 27, 2021). 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

Leibniz Institute for Financial Research SAFE ( email )

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

HOME PAGE: http://www.safe-frankfurt.de

Ca Foscari University of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy

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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