The effect lasted less than one day for the most part and that within 5 days, there was no significant effect. Using event study methods, they found that a positive content in the tweet elicited positive abnormal returns in the company, and negative content prompted negative abnormal returns. In 2017 an examination of the president Trump’s impact on ten publicly traded companies mentioned in tweets between November 2016 and January 2017, the time between his election and swearing in. A hacked Associated Press news account tweeted the false news that President Barack Obama had been injured in an explosion at the White House, a claim that was denied within minutes of the tweet being sent, but momentarily wiped $136.5 Billion off the value of the Dow Jones Industrial Average and the S&P 500 indexes. The socialite Kylie Jenner famously tweeted her displeasure with the a recent snapchat update, and SNAP Inc lost $1.3 Billion in value overnight. It isn’t only high placed company officials that can cause damage to the stock market valuation of a company. Famously, in the UK in April 1991, the eponymous owner and CEO of the jewellery chain Ratner Group, Gerald Ratner, delivered a speech to the Institute of Directors in which he mocked the quality of his company’s glassware and earrings decreasing the value of the company by \(\pounds \)500 million resulting in the company changing its name and sacking Gerald Ratner.
Of course, the phenomenon of CEOs statements affecting the value of their company is not new, though has been exaggerated by the speed at which Twitter and other social media can disseminate information. An August 2018 tweet where the billionaire claimed he was ‘considering taking Tesla private at $420’ and had ‘Funding secured’ led to an explosion in the share price (followed by a government investigation, $40 million in penalties, and the removal of Musk from his role as chairman ). This single tweet wiped out nearly $15 billion, or 12%, of Tesla Inc ($TSLA) market valuation, and it is notable that this was not even the first time the much-discussed CEOs twitter feed had caused investors headaches. On the First of May 2020, Elon Musk sent the tweet: ‘Tesla stock price is too high imo’. It is popular among world leaders and business people, providing potential investors with a direct link to the people they will be investing in and a potential treasure trove of data for researchers.
It rapidly grew into a significant source of news, with 100 million users by 2012 and 321 million by 2018. Twitter is a social media and microblogging website launched in 2006 by Jack Dorsey, Noah Glass, Biz Stone and Evan Williams which allows users to post a message of up to 140 characters (doubled to 280 in 2017) to be sent to their ‘followers’. There is no clear pattern to the direction and strength of the correlation, with some being strongly negatively correlated and others being strongly positively correlated, but in general the size of the correlation tends to indicate that price movement is driving sentiment, except in the turbulent economic times of the SARS-COV-2 pandemic in 2020.
There are fewer companies correlated in both turbulent and calm economic times. We also find this correlation gets stronger when returns are taken relative to the market. There is almost no correlation under any circumstances between non-financial news sources and price movements, however there is some correlation between financial news sentiment and stock price movements. Our results indicate that there is very limited correlation between Twitter sentiment and price movements and that this does not change much when returns are taken relative to the market or when the market is calm or turbulent. In this paper we examine whether daily news sentiment of several companies and Twitter sentiment from their CEOs have an impact on their market performance and whether traditional news sources and Twitter activity of heads of government impact the benchmark indexes of major world economies over a period spanning the outbreak of the SAR-COV-2 pandemic. Twitter has been responsible for some major stock market news in the recent past, from rogue CEOs damaging their company to very active world leaders asking for brand boycotts, but despite its impact Twitter has still not been as impactful on markets as traditional news sources.
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