Tweets, Tariffs, and Trades: The Role of Twitter Adoption on Information Transmission in Capital Markets

Abstract

This study investigates the moderating role of Twitter in the transmission of information into stock prices during the China-U.S. trade war, ultimately providing insight into the effects of the augmented information environment that investors operate in as a result of the rise of the prevalence of social media. Evidence of the moderating role of Twitter is provided from event-driven regression analysis (based on the event study methodology) using the stocks in the S&P 500 index as a sample. The behavior of the stocks is assessed over the time period from 2017 until 2025, over the course of China-U.S. trade war during which the active userbase on Twitter has grown twofold. The findings show that the increase of Twitter adaptation is associated with a negative moderating impact on stock returns during trade-war related announcements, suggesting that the increased prevalence of Twitter is associated with more pessimistic investor responses to new information in the China-U.S. trade war.