Working Paper: NBER ID: w28749
Authors: Francesco Bianchi; Roberto Gomez Cram; Howard Kung
Abstract: We use a high-frequency identification approach to document that individual politicians affect asset prices. We exploit the regular flow of viewpoints contained in Congress members’ tweets. Supportive (critical) tweets increase (decrease) the stock prices of the targeted firm and the corresponding industry in minutes around the tweet. The bulk of the stock price effects is concentrated in the tweets revealing news about future legislative action. The effects are amplified around committee meeting days, especially when the tweet originates from committee members and influential politicians. Overall, we show that Congress members’ social media accounts are an important source of political news.
Keywords: Social Media; Asset Prices; Congressional Viewpoints
JEL Codes: D72; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| supportive tweets (Y60) | stock prices increase (G12) |
| critical tweets (Y30) | stock prices decrease (G10) |
| tweets about future legislative actions (K16) | stock prices (G12) |
| tweets on committee meeting days (D72) | stock prices (G12) |
| tone of tweets (Y60) | stock returns (G12) |
| long-short portfolio strategy based on tweets (G11) | mean returns (C29) |