Please use this identifier to cite or link to this item:
http://hdl.handle.net/10397/93369
Title: | Can social media distort price discovery? Evidence from merger rumors | Authors: | Jia, W Redigolo, G Shu, S Zhao, J |
Issue Date: | Aug-2020 | Source: | Journal of accounting and economics, Aug. 2020, v. 70, no. 1, 101334 | Abstract: | We study whether social media can play a negative information role by impeding price discovery in the presence of highly speculative rumors. We focus on merger rumors, where most do not materialize. We find that merger rumors accompanied by greater Twitter activity elicit greater immediate market reaction even though rumor-related Twitter activity is unrelated to the probability of merger realization. The price distortion associated with tweet volume persists weeks after a rumor and reverses only after eight weeks. The price distortion is more pronounced for rumors tweeted by Twitter users with greater social influence, for target firms with low institutional ownership, and for rumors that supply more details. Our evidence suggests that social media can be a rumor mill that hinders the market's price discovery of potentially false information. | Keywords: | Merger and acquisition Merger rumor Persuasion bias Rumor Social media |
Publisher: | Elsevier | Journal: | Journal of accounting and economics | ISSN: | 0165-4101 | DOI: | 10.1016/j.jacceco.2020.101334 | Rights: | © 2020 Elsevier B.V. All rights reserved. © 2020. This manuscript version is made available under the CC-BY-NC-ND 4.0 license https://creativecommons.org/licenses/by-nc-nd/4.0/ The following publication Jia, W., Redigolo, G., Shu, S., & Zhao, J. (2020). Can social media distort price discovery? Evidence from merger rumors. Journal of Accounting and Economics, 70(1), 101334 is available at https://doi.org/10.1016/j.jacceco.2020.101334 |
Appears in Collections: | Journal/Magazine Article |
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File | Description | Size | Format | |
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Zhao_Crowd_Wisdom_Rumor.pdf | Pre-Published version | 1.32 MB | Adobe PDF | View/Open |
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