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Trump's tweets: Sentiment, stock market volatility, and jumps
Author(s) -
Nishimura Yusaku,
Dong Xuyi,
Sun Bianxia
Publication year - 2021
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/jfir.12248
Subject(s) - volatility (finance) , jump , economics , stock (firearms) , stock market , financial economics , realized variance , monetary economics , econometrics , mechanical engineering , paleontology , physics , horse , quantum mechanics , engineering , biology
We investigate the second‐moment response to tweets from US President Donald J. Trump in the US stock market. We find that Trump's tweeting positively and significantly affects the volatility and jumps during our sample's later period. The response of realized volatility to tweets is greater than that of continuous volatility because of the jump component in realized volatility. These results suggest that Trump's tweeting affects financial markets by sincreasing the market's jump tail risk, which cannot be hedged by investors without paying extra risk premiums, and therefore it requires careful consideration in investments.