Lookup NU author(s): Baback Roodbar Mohammadi,
Dr Hugh Metcalf,
Dr Fabrizio Casalin
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND).
© 2018 Elsevier Inc. This paper investigates whether the release of market-relevant news in the form of rumours on Twitter can explain the excess of market volatility previously attributed to private information, speculation, and noise traders. We define a simple theoretical model to show that the systematic information content of such rumours should result in detectable price effects in macro-markets. We then pinpoint the arrival of 63 rumours of forthcoming ECB actions over a 420-day sample of one-minute spot EUR-USD rates, and show that there is a real-time, intraday increase in market volatility. This largely unexplored information set can potentially account for significant amounts of unexplained volatility in macro-markets and, therefore, identify a possible explanation of one of the most prominent puzzles in price discovery research.
Author(s): Roodbar B, Metcalf H, Casalin F
Publication type: Article
Publication status: Published
Journal: International Review of Financial Analysis
Print publication date: 01/01/2019
Online publication date: 09/11/2018
Acceptance date: 06/11/2018
Date deposited: 10/01/2019
ISSN (print): 1057-5219
ISSN (electronic): 1873-8079
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