Investor Attention and Intraday Market Reaction to ECB Announcements

Abstract

We propose a novel measure of intraday investor attention by using messages sent on Twitter around European Central Bank announcements. We then analyze the market impact of the press conferences conditional on the level of investor attention prior to the announcements. We find that absolute price changes are higher when investor attention is high before the announcements. Twitter allows us to build more reliable measures of attention than the number of articles in the media, the volume of search queries on Google, or the number of messages sent on StockTwits. Our results are robust to the inclusion of the VIX, lagged returns, and the economic policy uncertainty index. It suggests that central bankers can use the level of attention prior to the announcements to improve their anticipation of the magnitude of the market's reaction to the announcement.

Keywords: investor attention, central bank, asset pricing, Twitter, social media.