Researcher ORCID Identifier
https://orcid.org/0000-0001-9115-212X
Graduation Year
2021
Date of Submission
11-2020
Document Type
Open Access Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics
Reader 1
Eric Hughson
Terms of Use & License Information
Rights Information
© 2020 David J Halle
OCLC Record Number
1243007911
Abstract
Using stock market return data from 2007 to 2019 from The Center for Research in Security Prices, I inquire into the impact that Twitter has on the overreactions of individual stock returns by breaking down returns into pre and post-Twitter periods. I examine negative serial correlation, demonstrating return reversals, between a lag crossed Twitter dummy variable and initial returns. With stock reversals serving as an indicator of initial overreaction and assuming stationarity of overreactions over time, I find that the presence of Twitter results in significantly more overreactions for highly followed companies when using monthly returns. However, when assessing Twitter’s influence using weekly returns, the results suggest the possibility of return momentum. Similarly, Twitter’s influence on overreaction is a highlighted when evaluating only negatively or positively large returns, producing greater significance despite a decrease sample size. While these promising results are not economically significant and thus do not reveal a viable contrarian investment strategy, my paper lays the foundation for a predictive model based of Twitter’s influence on company returns.
Recommended Citation
Halle, David, "Twitter’s Relationship with Overreaction in Individual Security Returns" (2021). CMC Senior Theses. 2559.
https://scholarship.claremont.edu/cmc_theses/2559
