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Twitter activity, investor attention, and the diffusion of information

Author

Listed:
  • David Rakowski
  • Sara E. Shirley
  • Jeffrey R. Stark

Abstract

We examine the impact of Twitter attention on stock prices by examining over 21 million company‐specific tweets over a 5‐year period. Through a quasi‐natural experiment identifying official Twitter outages, we find that Twitter influences stock trading, especially among small, less visible securities primarily traded by retail investors. In addition, we determine that Twitter activity is associated with positive abnormal returns and when tweets occur in conjunction with traditional news events, more information is spread to investors. Finally, we show that retail investor activity drives the Twitter effect as institutional investors less actively trade the affected stocks.

Suggested Citation

  • David Rakowski & Sara E. Shirley & Jeffrey R. Stark, 2021. "Twitter activity, investor attention, and the diffusion of information," Financial Management, Financial Management Association International, vol. 50(1), pages 3-46, March.
    • Handle: RePEc:bla:finmgt:v:50:y:2021:i:1:p:3-46
    DOI: 10.1111/fima.12307
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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