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Social media and price discovery: The case of cross‐listed firms

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  • Rui Fan
  • Oleksandr Talavera
  • Vu Tran

Abstract

In this article, we examine whether social media information affects the price‐discovery process for cross‐listed companies. Using over 29 million overnight tweets mentioning cross‐listed companies, we examine the role of social media for a link between the last periods of trading in the US markets and the first periods in the UK market. Our estimates suggest that the size and content of information flows on social networks support the price‐discovery process. The interactions between lagged US stock features and overnight tweets significantly affect stock returns and volatility of cross‐listed stocks when the UK market opens. These effects weaken and disappear 1 to 3 hr after the opening of the UK market. We also develop a profitable trading strategy based on overnight social media, and the profits remain economically significant after considering transaction costs.

Suggested Citation

  • Rui Fan & Oleksandr Talavera & Vu Tran, 2023. "Social media and price discovery: The case of cross‐listed firms," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 46(1), pages 151-167, February.
    • Handle: RePEc:bla:jfnres:v:46:y:2023:i:1:p:151-167
    DOI: 10.1111/jfir.12310
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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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