Presidential candidates linguistic tone: The impact on the financial markets

Abstract We investigate U.S. presidential candidates’ unprecedented use of Twitter to compliment on specific firms during election campaigns. We examine the linguistic tone used in presidential candidates’ tweets and we find that it significantly affects stock market reaction. Trump’s tweets bearing positive linguistic tone about specific firms shows daily CAR of 0.20%, whereas the positive tone from all Republican yields a CAR of 0.24%. Linguistic tone effects are particularly significant when media firms are excluded from the sample. Our results suggest that investors recognize the importance for firm value of information transmitted on social media by an influential source.