Presidential candidates linguistic tone: The impact on the financial markets

• Published in: Economics letters Vol. 204; p. 109876
• Main Authors: Marinč, Matej, Massoud, Nadia, Ichev, Riste, Valentinčič, Aljoša
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01-07-2021; Elsevier Science Ltd
• Subjects: Candidates; Companies; Elections; Event study; Investor sentiment; Investors; Linguistic tone; Mass media effects; Political campaigns; Presidential candidates; Presidential elections; Securities markets; Social media; Social networks; Stock exchanges; Stock price reaction; Twitter; United States > US; P16; Investor sentiment; G12; Twitter; Linguistic tone; G14; Event study; Stock price reaction
• ISSN: 0165-1765; 1873-7374
• DOI: 10.1016/j.econlet.2021.109876

We investigate U.S. presidential candidates’ unprecedented use of Twitter to compliment on specific firms during election campaigns. We examine the linguistic tone used in presidential candidates’ tweets and we find that it significantly affects stock market reaction. Trump’s tweets bearing positive linguistic tone about specific firms shows daily CAR of 0.20%, whereas the positive tone from all Republican yields a CAR of 0.24%. Linguistic tone effects are particularly significant when media firms are excluded from the sample. Our results suggest that investors recognize the importance for firm value of information transmitted on social media by an influential source.
•U.S. presidential candidates’ unprecedented use of Twitter.•Linguistic tone used in presidential candidates’ tweets.•Linguistic tone for media and non-media firms.•Influencing firms through Twitter.