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Social media, news media and the stock market

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  • Jiao, Peiran
  • Veiga, André
  • Walther, Ansgar

Abstract

We study the effect on stock volatility and turnover of coverage by traditional news media and social media. We find that coverage by traditional news media predicts decreases in subsequent volatility and turnover, but coverage by social media predicts increasesin volatility and turnover. We show that these patters are consistent with a model of “echo chambers”, where social networks repeat news, but some investors interpret repeated signals as genuinely new information.

Suggested Citation

  • Jiao, Peiran & Veiga, André & Walther, Ansgar, 2020. "Social media, news media and the stock market," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 63-90.
    • Handle: RePEc:eee:jeborg:v:176:y:2020:i:c:p:63-90
    DOI: 10.1016/j.jebo.2020.03.002
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    9. Xiaohong Shen & Gaoshan Wang & Yue Wang & Alfred Peris, 2021. "The Influence of Research Reports on Stock Returns: The Mediating Effect of Machine-Learning-Based Investor Sentiment," Discrete Dynamics in Nature and Society, Hindawi, vol. 2021, pages 1-14, December.
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    17. Abdi, Farshid & Kormanyos, Emily & Pelizzon, Loriana & Getmansky, Mila & Simon, Zorka, 2021. "Market impact of government communication: The case of presidential tweets," SAFE Working Paper Series 314, Leibniz Institute for Financial Research SAFE, revised 2021.
    18. Justina Deveikyte & Helyette Geman & Carlo Piccari & Alessandro Provetti, 2020. "A Sentiment Analysis Approach to the Prediction of Market Volatility," Papers 2012.05906, arXiv.org.
    19. Ndubuisi, Gideon & Urom, Christian, 2023. "Dependence and risk spillovers among clean cryptocurrencies prices and media environmental attention," Research in International Business and Finance, Elsevier, vol. 65(C).
    20. Shuyu Zhang & Xuanyu Zhou & Huifeng Pan & Junyi Jia, 2019. "Cryptocurrency, confirmatory bias and news readability – evidence from the largest Chinese cryptocurrency exchange," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(5), pages 1445-1468, March.
    21. Yongan Xu & Jianqiong Wang & Zhonglu Chen & Chao Liang, 2023. "Sentiment indices and stock returns: Evidence from China," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 1063-1080, January.
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    More about this item

    Keywords

    Social media; News media; Asset prices;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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