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Social media and price discovery: the case of cross-listed firms

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  • Rui Fan

    (Swansea University)

  • Oleksandr Talavera

    (University of Birmingham)

  • Vu Tran

    (University of Reading)

Abstract

This paper examines whether social media information affects the price discovery process for cross-listed companies. Using over 29 million overnight tweets mentioning cross-listed companies, we investigate the role of social media for the linkage 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 in 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 after one to three hours after the UK market opening. 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, 2020. "Social media and price discovery: the case of cross-listed firms," Discussion Papers 20-05, Department of Economics, University of Birmingham.
    • Handle: RePEc:bir:birmec:20-05
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    References listed on IDEAS

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    Cited by:

    1. Wen Long & Man Guo, 2025. "Social media and capital markets: an interdisciplinary bibliometric analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 11(1), pages 1-32, December.

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    More about this item

    Keywords

    Twitter; investor sentiment; cross-listed stocks; text classification; computational linguistics;
    All these keywords.

    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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