| dc.description.abstract | In this study, we investigate whether U.S. President, Donald Trump’s Twitter
sentiment and activity affect financial markets. By employing the event study
methodology, we provide strong empirical evidence that our small-cap portfolios
and selected sample firms have been affected by Trump’s Twitter sentiment.
Overall, we find that positive sentiment tweets generate positive abnormal returns,
whereas negative sentiment tweets generate negative abnormal returns. The effect
persists multiple days after the announcement date for several of the sample firms,
which is considered a violation of the semi-strong form of the efficient market
hypothesis (EMH). The portfolios are consistent with the EMH for positive
tweets, as the effect is rapidly incorporated (within one day). For negative tweets,
the EMH is violated, as the cumulative average abnormal returns (CAAR)
continue to drift after the event. This indicates that the market finds it more
challenging to value negative Trump sentiment than positive Trump sentiment.
Moreover, we find that Trump’s Twitter sentiment affects stocks across all sizes
and multiple industries in our sample. Further, our secondary study provides
empirical evidence that Trump’s tweet frequency also affects the sample
portfolios. This effect persists over multiple days and accordingly violates the
EMH. Lastly, we present complementary findings regarding volume traded,
market volatility, and the variability in the effect of Trump’s tweets over time. | en_US |
