President Trump his Tweets and the Stock Market: A Study of How Trump’s Tweets Affect Targeted Companies’ Stock Prices

Jacob Ross Stenger & Gustav Frydendahl

Student thesis: Master thesis

Abstract

The microblogging platform Twitter is widely used to gather user-generated content providing meaningful insights to investors and financial analysts. Existing microblogging literature finds that aggregated user-generated content can predict stock price movements. However, limited research examines the stock market effect of high-profile individuals’ tweets (microblog posts on Twitter). One of the most followed users on Twitter is the 45th president of the US, Donald J. Trump. As a ‘businessman in the White House’, the President frequently shares his opinions on specific companies. In this paper, we use the event study methodology to determine how the opinions on targeted companies in Trump’s tweets affect the stock prices of these companies. We advance microblogging research by concluding that President Trump’s tweets directly affect stock prices. Our analysis shows that Trump’s positive company-specific tweets yield positive cumulative average abnormal returns on the day of the company-specific tweets, while negative company-specific tweets have a delayed negative effect on the targeted companies’ stock prices. Since our findings underline that investors react to Trump’s tweets, companies face a new risk (opportunity) which has previously been negligible; the risk (opportunity) of being targeted by the ‘leader of the free world’ on Twitter. As such, our findings have implications for both businesses and financial markets, while contributing to the pending debate regarding President Donald J. Trump’s usage of Twitter

Educations, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2019
Number of pages181