Social media, news media and the stock market

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Abstract

<p>We study the effect on stock volatility and turnover of coverage by traditional news media and social media. We find that coverage by traditional news media predicts decreases in subsequent volatility and turnover, but coverage by social media predicts increases in volatility and turnover. We show that these patters are consistent with a model of "echo chambers", where social networks repeat news, but some investors interpret repeated signals as genuinely new information. (C) 2020 Elsevier B.V. All rights reserved.</p>