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How (not) to be a noise trader

Vineet Bhagwat at the University of Oregon and Timothy Burch at the University of Miami have found that US companies which are active on Twitter see their share prices behave differently after earnings news. Twitter-active firms see their shares rise more in the days after good earnings news than firms not on Twitter; they enjoy a strong post-earnings announcement drift. But they also see prices recover more strongly in the days after bad results. This suggests that being on Twitter attracts investors’ attention, causing trading which distorts prices.

Jennifer Itzkowitz of Seton Hall University in New Jersey has found something stranger. She shows that shares whose names begin with letters earlier in the alphabet trade more than shares beginning with later letters. This is consistent with earlier research which has found that there’s more trading in shares whose ticker symbols are actual English words than there is in shares whose symbols are just a jumble of letters.

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