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The effects of rumours on financial market efficiency

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  • Uriel Spiegel
  • Tchai Tavor
  • Joseph Templeman

Abstract

During the last decade the world has faced a tremendous development of information technology and telecommunication. This study investigates the impact of rumours (released on the web) on common stock returns. The findings indicate that the market responds positively to rumours. During the event day and the five preceding days, the abnormal stock return is positive and statistically significant. In particular, the impact is stronger for single than for multi-rumours, for initial rather than subsequent rumours and for realized rumours than for nonrealized rumours.

Suggested Citation

  • Uriel Spiegel & Tchai Tavor & Joseph Templeman, 2010. "The effects of rumours on financial market efficiency," Applied Economics Letters, Taylor & Francis Journals, vol. 17(15), pages 1461-1464.
    • Handle: RePEc:taf:apeclt:v:17:y:2010:i:15:p:1461-1464
    DOI: 10.1080/13504850903035873
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    References listed on IDEAS

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    1. Kiymaz, Halil, 2001. "The effects of stock market rumors on stock prices: evidence from an emerging market," Journal of Multinational Financial Management, Elsevier, vol. 11(1), pages 105-115, February.
    2. Durand, Robert B. & Koh, Shern-Wei & Ng, Hock Guan, 2003. "From gold to silicon," Journal of Multinational Financial Management, Elsevier, vol. 13(3), pages 273-286, July.
    3. repec:bla:jfinan:v:59:y:2004:i:3:p:1259-1294 is not listed on IDEAS
    4. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
    5. Trueman, B & Wong, MHF & Zhang, XJ, 2000. "The eyeballs have it: Searching for the value in internet stocks," Journal of Accounting Research, Wiley Blackwell, vol. 38, pages 137-162.
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    Cited by:

    1. Yang, Ann Shawing, 2020. "Misinformation corrections of corporate news: Corporate clarification announcements," Pacific-Basin Finance Journal, Elsevier, vol. 61(C).
    2. Haas, Christian & Budin, Constantin & d’Arcy, Anne, 2024. "How to select oil price prediction models — The effect of statistical and financial performance metrics and sentiment scores," Energy Economics, Elsevier, vol. 133(C).
    3. Li, Qian & Wang, Jiamin & Bao, Liang, 2018. "Do institutions trade ahead of false news? Evidence from an emerging market," Journal of Financial Stability, Elsevier, vol. 36(C), pages 98-113.
    4. Yang, Xiaolan & Zhu, Yu & Cheng, Teng Yuan, 2020. "How the individual investors took on big data: The effect of panic from the internet stock message boards on stock price crash," Pacific-Basin Finance Journal, Elsevier, vol. 59(C).

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