Abstract

AbstractWe compare news in Twitter with traditional news outlets and emphasize their differential impact on Eurozone's sovereign bond market. We reveal a two‐way information flow between Twitter's “Grexit” tweets and “Grexit” mentions in traditional news which suggests not only that both types of news serve as important empirical predictors for the sovereign bond market but also that the “old” (traditional news) and the “new” (Twitter) media are connected; however, the influence of Twitter on traditional news is stronger. Grexit tweets raise the Greek spread more than Grexit mentions in traditional news. Weak contagion effects are reported for Portugal and Ireland.

Highlights

  • “The brains of humans and other animals contain a mechanism that is designed to give priority to bad new

  • We look at the differential impact of the “Grexit” mentions coming from Twitter, traditional news media and the orthogonal Twitter on the sovereign spreads, over and above the impact of economic/financial fundamentals, namely measures of default risk, liquidity risk and global financial risk

  • From the executed causal and impulse response analysis, we find that the information flow between Twitter and the traditional news outlets is bidirectional which suggests that both Twitter and traditional media set the agenda

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Summary

Introduction

“The brains of humans and other animals contain a mechanism that is designed to give priority to bad news”. For instance, one source of news (say Twitter) is setting the agenda, the underlying information set should provide insights that go beyond the respective insights of the competing source (say traditional media) in affecting financial markets (in terms of impact and duration). The validation testing results robustify the role of Twitter as an agenda-setting news source in the sovereign bond market This finding underlines the increasing power of information that appears and is shared on Twitter, bringing into the picture the importance of regulating social media; we return to this very issue in Section 6 where we discuss our main findings more in detail.

Literature Review
Non-causality at various horizons
Local projections
Empirical findings
Findings
Discussion of results and conclusions
Full Text
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