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Fake news

Matt Brigida and William R. Pratt

The North American Journal of Economics and Finance, 2017, vol. 42, issue C, 564-573

Abstract: This analysis uses Twitter stock and options prices sampled at a 30s frequency around the fake news announcement, of a bid for a controlling stake in Twitter stock, to investigate how noise trading and informed trading is disseminated into equity and option markets. We find reaction to the fake news occurred in the equity market, and the option market reacted with a delay. This differs from many analyses of actual news events, which found informed traders prefer the options market, and information from their trades then leaks into the equity market. We conclude uninformed traders, and those aware of the hoax, prefer to trade in equity over option markets. This result has implications for isolating informed trading around actual news events.

Keywords: Informed trading; Noise; Microstructure; Implied volatility; Hoax; Changepoint (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G40 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:42:y:2017:i:c:p:564-573

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