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Market impact of government communication: The case of presidential tweets

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  • Abdi, Farshid
  • Kormanyos, Emily
  • Pelizzon, Loriana
  • Getmansky, Mila
  • Simon, Zorka

Abstract

We propose the "President reacts to news" channel of stock returns by studying the financial market impact of the Twitter account of the 45th president of the United States, Donald Trump. We use machine learning algorithms to classify topic and textual sentiment of 1,400 economy-related tweets to investigate whether they contain relevant information for financial markets. Analyzing high-frequency data, we find that after controlling for past market movements, most tweets are reactive and predictable, rather than novel and informative. The exceptions are tweet topics where the president has direct policy authority and his negative sentiment could adversely a↵ect economic outcomes.

Suggested Citation

  • Abdi, Farshid & Kormanyos, Emily & Pelizzon, Loriana & Getmansky, Mila & Simon, Zorka, 2021. "Market impact of government communication: The case of presidential tweets," SAFE Working Paper Series 314, Leibniz Institute for Financial Research SAFE, revised 2021.
    • Handle: RePEc:zbw:safewp:314
    DOI: 10.2139/ssrn.3840203
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    More about this item

    Keywords

    Government communication; Social media; Twitter; Machine learning; ETFs;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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