The Effects of Twitter Sentiment on Stock Price Returns

Social media are increasingly reflecting and influencing behavior of other complex systems. In this paper we investigate the relations between a well-know micro-blogging platform Twitter and financial markets. In particular, we consider, in a period of 15 months, the Twitter volume and sentiment about the 30 stock companies that form the Dow Jones Industrial Average (DJIA) index. We find a relatively low Pearson correlation and Granger causality between the corresponding time series over the entire time period. However, we find a significant dependence between the Twitter sentiment and abnormal returns during the peaks of Twitter volume. This is valid not only for the expected Twitter volume peaks (e.g., quarterly announcements), but also for peaks corresponding to less obvious events. We formalize the procedure by adapting the well-known "event study" from economics and finance to the analysis of Twitter data. The procedure allows to automatically identify events as Twitter volume peaks, to compute the prevailing sentiment (positive or negative) expressed in tweets at these peaks, and finally to apply the "event study" methodology to relate them to stock returns. We show that sentiment polarity of Twitter peaks implies the direction of cumulative abnormal returns. The amount of cumulative abnormal returns is relatively low (about 1-2%), but the dependence is statistically significant for several days after the events

Technical Change and Industrial Dynamics as Evolutionary Processes

This work prepared for B. Hall and N. Rosenberg (eds.) Handbook of Innovation, Elsevier (2010), lays out the basic premises of this research and review and integrate much of what has been learned on the processes of technological evolution, their main features and their effects on the evolution of industries. First, we map and integrate the various pieces of evidence concerning the nature and structure of technological knowledge the sources of novel opportunities, the dynamics through which they are tapped and the revealed outcomes in terms of advances in production techniques and product characteristics. Explicit recognition of the evolutionary manners through which technological change proceed has also profound implications for the way economists theorize about and analyze a number of topics central to the discipline. One is the theory of the firm in industries where technological and organizational innovation is important. Indeed a large literature has grown up on this topic, addressing the nature of the technological and organizational capabilities which business firms embody and the ways they evolve over time. Another domain concerns the nature of competition in such industries, wherein innovation and diffusion affect growth and survival probabilities of heterogeneous firms, and, relatedly, the determinants of industrial structure. The processes of knowledge accumulation and diffusion involve winners and losers, changing distributions of competitive abilities across different firms, and, with that, changing industrial structures. Both the sector-specific characteristics of technologies and their degrees of maturity over their life cycles influence the patterns of industrial organization ? including of course size distributions, degrees of concentration, relative importance of incumbents and entrants, etc. This is the second set of topics which we address. Finally, in the conclusions, we briefly flag some fundamental aspects of economic growth and development as an innovation driven evolutionary process.Innovation, Technological paradigms, Technological regimes and trajectories, Evolution, Learning, Capability-based theories of the firm, Selection, Industrial dynamics, Emergent properties, Endogenous growth

Tax Policy and CO2 Emissions – An Econometric Analysis of the German Automobile Market

In addition to efficiency standards and consumer information, car-related taxes constitute one of three pillars of the European Commission’s strategy to reduce CO2 emissions from passenger cars.A longstanding question concerns the effectiveness of such taxes in determining the car-purchasing behavior of households. Several recent studies suggest that purchases are primarily determined by retail costs rather than by taxes, the latter of which are typically incurred over the lifetime of the car. Using panel data on new-car registrations in Germany, Europe’s largest car market, the present paper addresses this issue with an econometric analysis of the impact of fuel costs and circulation taxes on car market shares. By employing a nested logit model that explicitly recognizes the segmented structure of the car market, the analysis takes account of correlation in unobserved shocks among cars belonging to the same market segment. Moreover, given the panel structure of the data, a fixed effects estimator is employed to control for the influence of unobservable, timeinvariant automobile attributes that could otherwise induce biases in the estimated coefficients. Contrasting with much of the evidence garnered to date, the results suggest that circulation taxes and fuel costs significantly determine car market shares, and hence may serve as effective instruments in influencing the composition of the car fleet and associated CO2 emissions.Fuel tax, circulation tax, car market, Germany, panel data, nested logit model

The financial crisis, trade finance and the collapse of world trade

The financial crisis that began in August 2007 and intensified in the fall of 2008 pushed the global economy into its most severe recession since World War II. As 2009 drew to a close, there were signs that economic activity in many countries was rebounding, but the fragile state of many countries' financial systems and concerns about how governments and central banks will manage the exit strategies from the extraordinary measures taken to mitigate the worst effects of the crisis leave many open questions about the ultimate course of the recovery.Globalization ; Global financial crisis ; Trade credit ; International trade

Innovation and Institutional Ownership

We find that institutional ownership in publicly traded companies is associated with more innovation (measured by cite-weighted patents). To explore the mechanism through which this link arises, we build a model that nests the lazy-manager hypothesis with career-concerns, where institutional owners increase managerial incentives to innovate by reducing the career risk of risky projects. The data supports the career concerns model. First, whereas the lazy manager hypothesis predicts a substitution effect between institutional ownership and product market competition (and managerial entrenchment generally), the career-concern model allows for complementarity. Empirically, we reject substitution effects. Second, CEOs are less likely to be fired in the face of profit downturns when institutional ownership is higher. Finally, using instrumental variables, policy changes and disaggregating by type of owner we find that the effect of institutions on innovation does not appear to be due to endogenous selection.Career Concerns, Innovation, Institutional Ownership, Productivity and R&D

Media Endorsements and Stock Returns: Evidence from the Announcement of New Products

Unlike previous studies that have focused on the valuation effects of corporate announcements, this thesis which is rooted in the interface between marketing and behavioral finance, examines whether investors’ decisions are influenced by the word content of newspaper reports for new product announcements. By applying a textual analysis, the findings of this research project demonstrate that announcements of new products which financial newspapers cover using positive word content earn significantly higher abnormal returns than firms’ whose new-product announcements were covered without using positive word content by the financial press. The results of this study indicate that the significantly inflated abnormal returns are, on average, 270 basis points higher than the returns for new-product announcements that do not contain positive word coverage from financial newspapers. The evidence also reveals that only positive textual coverage exerts a significant impact on the market’s reaction. In addition, this study documents that announcing firms realize significantly higher abnormal returns than their industry rival firms which do not actively introduce new products into the market place. However, the stock price of rival firms is not adversely affected by the new product announcements of announcing firms. Furthermore, the results of this project illustrate the same but more pronounced pattern of abnormal gains for the technology-based industries. On the other hand, dramatic differences for the non-technology related industries could not be found. Additionally, the results of this research project document that there is an abnormally high Google Search Volume Index (SVI) for firms following positive announcements, suggesting that news with positive word content attract stronger investor attention. Moreover, this evidence suggests that the interaction between investor attention, measured by the SVI, and new- product announcements reveal that there is an inter-play between demand for new information (i.e., SVI) and supply of new information (i.e., new-product announcements), which shapes the market’s ultimate reaction to news. Overall, the results suggest that the market reacts to the linguistic content of the new-product announcement rather than to the announcement itself. This research contributes to the literature in several ways. First, this is the first study to examine the relation between shareholder value and textual content of new-product announcements. Second, unlike previous studies which ignore the textual and tone content of new-product announcements, the evidence of this thesis, reveals that not every new-product announcement leads to significant gains for stockholders of the announcing firm. Only new-product announcements with positive word content are associated with positive abnormal gains for the announcing firms. Third, gains to the new-product announcing firms significantly exceed those of rival firms. Fourth, this study provides evidence outside of the U.S. market and, hence, avoids the standard criticism that observed empirical regularities arise from data mining. Finally, from a practical perspective, the interesting implication of the empirical analysis of this thesis is that the textual design of new-product announcements plays a critical role in terms of how it affects investors, and, hence, the way they react to such announcements

Attention to Rivalry among Online Platforms and Its Implications for Antitrust Analysis

Many online businesses, including most of the largest platforms, seek and provide attention. These online attention rivals provide products and features to obtain the attention of consumers and sell some of that attention, through other products and services, to merchants, developers and others who value it. The multi-sided business of seeking and providing attention is fluid with rivalries crossing boundaries defined by the features of the products and services. It is also dynamic. Rivals introduce new products and services, some involving drastic innovation, frequently. Online attention rivals impose competitive constraints on each other. Product differentiation tempers the significance of these constraints in particular situations. But the relevant differentiation mainly involves aspects of the attention that is procured and sold rather than, necessarily, particular features of the products and services used for acquiring and delivering that attention. Antitrust analysis should consider these competitive constraints in evaluating market definition, market power, and the potential for anticompetitive effects. Most importantly, antitrust analysis should focus on competition for seeking and providing attention rather than the particular products and services used for securing and delivering this attention. The existence of competition among attention rivals does not imply that antitrust should reduce the vigor with which it examines mergers and exclusionary practices among these platforms. It just needs to look for problems in the right places

A Review of the Monitoring of Market Power The Possible Roles of TSOs in Monitoring for Market Power Issues in Congested Transmission Systems

The paper surveys the literature and publicly available information on market power monitoring in electricity wholesale markets. After briefly reviewing definitions, strategies and methods of mitigating market power we examine the various methods of detecting market power that have been employed by academics and market monitors/regulators. These techniques include structural and behavioural indices and analysis as well as various simulation approaches. The applications of these tools range from spot market mitigation and congestion management through to long-term market design assessment and merger decisions. Various market-power monitoring units already track market behaviour and produce indices. Our survey shows that these units collect a large amount of data from various market participants and we identify the crucial role of the transmission system operators with their access to dispatch and system information. Easily accessible and comprehensive data supports effective market power monitoring and facilitates market design evaluation. The discretion required for effective market monitoring is facilitated by institutional independence.Electricity, liberalisation, market power, regulation

Product Development in the World Auto Industry

macroeconomics, auto industry, management efficiency, productivity