Date of Award

2020

Document Type

Thesis

Degree Name

Bachelor of Science

Department

Economics

First Advisor

Dr. David North

Abstract

Implementing event-study analysis, I find that President Trump’s tweets about publicly traded companies cause daily abnormal returns of 0.25% in a company’s stock in the same direction as the sentiment of the tweet: positive tweets increase abnormal returns by 0.25% on the day’s end, while negative tweets will cause -0.25% abnormal returns.

Additionally, I find that President Trump’s company-specific tweets increase the daily abnormal trading volume and volatility of a company’s stock by 19%, regardless of tweet sentiment. For abnormal returns and abnormal trading volume, the effects of President Trump’s tweets do not last multiple days after a tweet. However, company stocks experience persistent higher volatility up to four days after President Trump tweets about them.

When breaking the sample into subsets, I find that President Trump’s positive sentiment company-specific tweets have an asymmetrically stronger impact on a company’s abnormal returns and abnormal trading volume than that of negative sentiment company-specific tweets. For most measures, President Trump’s Twitter influence increases greatly when he tweets about a company during U.S. market trading hours. Outlier robust regressions confirm that the main abnormal returns results are not driven by outliers, while the results for volume and volatility appear to be inflated by outliers.

Because this type of stock market influence causes persistent increased volatility and has potential to be abused, I recommend that lawmakers consider limiting the scope of presidents’ ability to tweet about publicly traded companies.

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