Where Has the Foreign Signal Gone?

Piyush Akimitsu and Ulrich Hounyo
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Piyush Akimitsu: SUNY at Albany
Ulrich Hounyo: SUNY at Albany

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Abstract: We compare the relation between sentiment noise in the Twitter feed and losses for stocks of domestic and foreign firms. The mean quarterly domestic-foreign difference in the slope of next-quarter losses on measured noise is -1.40 (Newey-West t = -2.99). This slope is negative for 78 and 48 percent of the quarters for domestic and foreign stocks, respectively (block-bootstrap p = 0.016). Thus, this relationship is temporally more stable for domestic stocks. We use a noisy rational expectations model to explain these patterns through the composition of the contributor pool. The feeds for stocks of foreign firms have higher repeat-author concentration and a larger model-implied nonfundamental component than those for domestic firms. We interpret these differences through the producer-knowledge mismatch hypothesis. For foreign firms, the English-language contributor pool underrepresents the home-market investors who tend to possess informational advantages about them. Thus, the foreign signal is not gone but diluted.

Date: 2026-10
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