The Long and Short-Term Effect of Social Media Manipulation on the NASDAQ Index

Social media's power to manipulate the financial markets has sparked significant debates, particularly regarding its impact on stock exchanges and cryptocurrency markets. This study investigates the influence of social media manipulation, specifically through Twitter, on the NASDAQ Composite index during its decline from December 1, 2021, to January 31, 2022. Utilizing daily data, the research emphasizes the direction of the relationship between Twitter sentiment and the NASDAQ index. Sentiment analysis, conducted using TextBlob, determines the positivity or negativity of the language used in tweets related to NASDAQ. The study tests the hypothesis of a long- and short-term relationship between the sentiment scores and the index. Time series analysis required ensuring stationarity, which was verified using modern and traditional unit root tests. Subsequently, an ARDL model was employed to examine these relationships. The findings reveal that social media manipulation via Twitter does not impact NASDAQ Composite prices in either the long or short term. Instead, price variations in the NASDAQ Composite index are significantly influenced by the sentiment expressed on Twitter.