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Prediction Markets, Twitter and Bigotgate

Listed author(s):
  • Leighton Vaughan Williams

    (Nottingham Trent University)

  • James Reade

    ()

    (Department of Economics, University of Reading)

We consider the impact of breaking news on market prices by looking at activity on the micro-blogging platform Twitter surrounding the #bigotgate scandal during the 2010 UK General Election, and subsequent movements of betting prices on a prominent betting exchange, Betfair. We find that the response of market prices appears sluggish, as over a thousand tweets are sent before any price movement is registered (despite trading taking place). However, this slow movement appears to be explained by the need for corroborating evidence via more traditional forms of media; once important Tweeters begin to Tweet, once hyperlinks are added to Tweets, and once television and radio news bulletins begin, prices begin to move.

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File URL: http://www.reading.ac.uk/web/FILES/economics/emdp2014114.pdf
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Paper provided by Henley Business School, Reading University in its series Economics & Management Discussion Papers with number em-dp2014-09.

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Length: 25 pages
Date of creation: 25 Nov 2014
Handle: RePEc:rdg:emxxdp:em-dp2014-09
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Web page: http://www.henley.reading.ac.uk/

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  1. Fama, Eugene F., 1998. "Market efficiency, long-term returns, and behavioral finance," Journal of Financial Economics, Elsevier, vol. 49(3), pages 283-306, September.
  2. Tushar Rao & Saket Srivastava, 2012. "Modeling Movements in Oil, Gold, Forex and Market Indices using Search Volume Index and Twitter Sentiments," Papers 1212.1037, arXiv.org.
  3. Karen Croxson & J. James Reade, 2014. "Information and Efficiency: Goal Arrival in Soccer Betting," Economic Journal, Royal Economic Society, vol. 124(575), pages 62-91, 03.
  4. Julianne Treme & Zoe VanDerPloeg, 2014. "The Twitter Effect: Social Media Usage as a Contributor to Movie Success," Economics Bulletin, AccessEcon, vol. 34(2), pages 793-809.
  5. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
  6. Asquith, Paul, 1983. "Merger bids, uncertainty, and stockholder returns," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 51-83, April.
  7. Alasdair Brown, 2014. "Information Processing Constraints and Asset Mispricing," Economic Journal, Royal Economic Society, vol. 124(575), pages 245-268, 03.
  8. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
  9. Chi Feng & Yang Nathan, 2011. "Twitter Adoption in Congress," Review of Network Economics, De Gruyter, vol. 10(1), pages 1-46, March.
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