Twitter as driver of stock price

Abstract

The goal of this research is to examine the dynamic relationship of Twitter and stock price, by examining the effects for the ten most valuable brands according Interbrand (2010): Coca-Cola, IBM, Microsoft, Google, McDonald’s, Intel, Nokia, Disney, Toyota and Cisco. A VAR modelling approach captures the short and long term effects of Twitter to stock price and stock price to Twitter. Effects were found for 5 of the 10 brand. For Coca-Cola and Toyota, the number of brand sentiment tweets drives stock price. For Microsoft and Disney the brand sentiment index (sentiment extracted from Twitter) drives stock price. For Nokia this relation is twisted, the stock price drives the number of brand sentiments tweets, the brand sentiment index and the number of followers. Twitter does not instantaneously have an effect, investor reactions grow over time. On average, it takes 2 till 4 days before the impact peaks. The effect dies out 1 till 6 days after the peak day.