Company stock reactions to black noise tweets: evidence from steel industry

Caner Ozdurak, Veysel Ulusoy
2020 Pressacademia  
Purpose -The purpose of this study is to test the validity of super-fast development of social media and its wide range of use by even professional investors as the new financial contagion which is carried with "Black Noise" tweets. Newly established robotic modern finance environment and various news channels provide the necessary infrastructure to utilize a focused and directed market noise. Measuring the impact of this noise in the financial market volatility is a crucial and important
more » ... Methodology -In this study, we investigate the news impact of trade wars and monetary policy news on steel industry of US and its reflection on Turkish markets utilizing 30 minutes high frequency return data. The novelty is this study is the interaction terms that we generated and embedded in the E-GARCH models to test the reactions of steel major listed US steel industry companies such as US Steel, AK Steel, Nucor and the pioneer Turkish company Ereğli in this sector. Findings-Findings of this study highlights that specific news about trade war and monetary policy have a significant impact on steel company returns. For further research papers testing the speculation strength of such tweet can be a beneficial topic for the other researchers. Conclusion-As a result of this study, being one the major market makers, Trump's direct messages to the market via Twitter and such, about sanctions, interest rates and monetary policy creates "Black Noise" in financial markets. Even in a durable production industry like steel sector this leads to speculation.
doi:10.17261/pressacademia.2020.1192 fatcat:snlmjkrot5dezguopqylxybiye