Social media, high‐frequency trading, and market making after‐hours – Evidence from presidential tweets

Abstract I analyze differences between the core and extended trading sessions in the high‐frequency reaction of equity markets to potential news. Using presidential tweets as unanticipated, potentially market‐stirring events, I find that volatility increases and liquidity deteriorates within fractions of a second after a tweet. The speed of quote adjustments indicates that algorithmic traders monitor social media sources around the clock and automatically trade upon this information. Compared to the core trading session, the reduction in market quality is much stronger and faster during the extended trading hours, when liquidity is lower and designated market maker participation is optional.