Trump tweets and the efficient Market Hypothesis

Jeffery A. Born (), David H. Myers and William J. Clark
Additional contact information
Jeffery A. Born: Northeastern University, Postal: D’Amore-McKim School of Business, 413 Hayden Hall, 360 Huntington Avenue, Boston, MA 02115, USA
David H. Myers: Northeastern University, Postal: Boston, MA, USA
William J. Clark: Morgan Stanley, Postal: USA

Algorithmic Finance, 2017, vol. 6, issue 3-4, 103-109

Abstract: In a Semi-Strong Form (SSF) Efficient Market, asset prices should respond quickly and completely to the public release of new information. In the period from his election on 11/8/16 to his swearing in ceremony on 1/20/17, President-elect Trump posted numerous statements (‘tweets’) on his Twitter messaging service account that identified ten publicly traded firms. In the absence of new information, the Efficient Market Hypothesis (EMH) predicts that these announcements should have little or no price impact on the common stocks of these firms. Using standard event study methods, we find that positive (negative) content tweets elicited positive (negative) abnormal returns on the event date and virtually all of this effect is from the opening stock price to the close. Within five trading days, the CARs are no longer statistically significant. President-elect Trump’s tweets were associated with increases in trading volume and Google Search activity. Taken as a whole, the price and trading volume response, combined with Google Search activity is consistent with hypothesis that it was small/noise traders who were acting on President-elect Trump’s tweets and that their impacts were transitory.

Keywords: Efficient Market Hypothesis; trump; tweets; noise traders (search for similar items in EconPapers)
JEL-codes: C00 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (10)

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