11 ms·
A synthetic control causal analysis of Musk's tweet on Tesla stock price
- ve55 6y agoDespite the oddly enjoyable humor from the situation, performing an analysis like this is important to do because the vast majority of finance headlines are just instantly made up after something occurs, and they often mistakenly imply causality when there is no evidence of it, or sometimes even evidence again it.
- 2019-nCoV 6y agoDon't let the Bayesian rhetoric deceive you — this analysis succumbs to the same pitfalls of mistakenly implying causality.
- ve55 6y agoThat's true, there's a lot lacking here, including looking at TSLA's volatility. But, it's much better than providing zero evidence imo.
- clairity 6y agoit's hilarious, not because musk shot himself in the foot (in the long-run he likely didn't), but because he tweaked the whole gambling industry otherwise known as the stock market, day traders and algorithms alike, in 7 words (9 actually, but whatevs) on a popularity contest, aka social, network. he's too cool for school.
- Melting_Harps 6y ago> it's hilarious, not because musk shot himself in the foot (in the long-run he likely didn't), but because he tweaked the whole gambling industry otherwise known as the stock market, day traders and algorithms alike, in 7 words (9 actually, but whatevs) on a popularity contest, aka social, network. he's too cool for school. I hope he burned a bunch of the WSB troll's positions they paid with their stimulus money with that tweet. I'm going to go check the subreddit now to see the dismay and Robinhood screen caps in all red now [1] [2]. I also find it amusing, but then again I also found the 'Bankwapt' tweet funny, too. Anyone who bought that dip and rode it to 9XX did also. 1: https://www.reddit.com/r/wallstreetbets/comments/gbod91/too_high_imo/ https://www.reddit.com/r/wallstreetbets/comments/gbod91/too_... 2 https://www.reddit.com/r/wallstreetbets/comments/gbsjhe/didnt_trust_my_vibe_and_paid_for_it_dearly/ https://www.reddit.com/r/wallstreetbets/comments/gbsjhe/didn...
- maest 6y agoFirst of all, for every buyer there's a seller, so for each person that lost money on Tesla, somebody made money (relative to the benchmark). Secondly, I don't know why you think only "day traders and algorithms" were affected by this tweet. I assure you, retail passive money (e.g. pension funds) also have exposure to Tesla. Thirdly, why so gleeful about someone's perceived loss?
- clairity 6y ago1) there are winners and losers in gambling too. 99.9% of trades are gambles, not value investments. you can more charitably call it providing liquidity to the value investor, but that's only true of the better known ~20% of equities. 2) retail passive funds are long-term investors, and pricing blips like this will be washed away in the long run. and it's likely a tiny exposure relative to the overall size of the fund. 3) it's an ingenious and mirthful move to target the greedy vs. true investors. if there aren't negative repercussions to the gambling, you'd lose the drive to optimize mispricings and arbitrage opportunities out of the system. edit: note that the likely purpose of opening up the market to "unsophisticated" investors is to provide added volume and liquidity to "sophisticated" investors, not to provide economic opportunities to the unsophisticated.
- odnes 6y agoDoes anyone know if Twitter are allowed to legally frontrun the markets before making tweets publicly visible?
- p1necone 6y agoAlmost certainly not, sounds like textbook insider trading to me?
- sjg007 6y agoProbably wouldn’t be. In any regard could sell an early access feed if they wanted and it’d be legit.
- huac 6y agohttps://developer.twitter.com/en/enterprise https://developer.twitter.com/en/enterprise
- bpodgursky 6y agoThey could do this, but then Twitter almost certainly wouldn't be considered a valid instrument for releasing financial data (as it is right now): https://www.sec.gov/news/press-release/2013-2013-51htm https://www.sec.gov/news/press-release/2013-2013-51htm
- jameshart 6y agoTHAT is a very interesting press release (and itself raises the slightly circular question: are SEC press releases considered a valid instrument for releasing legal guidance on how to comply with SEC regulations?). But: If the SEC regard Twitter as, to all intents and purposes, a neutral 'wire service', then that means the SEC allows Twitter users to assume - regardless of what Twitter's own ToS say - that Twitter distributes information fairly and impartially. Weirdly, it's not clear that the SEC has any way to regulate Twitter to ensure that they actually meet that assumption. If they were to discover, for example, that Twitter DID route interesting tweets to their in-house investment management team before publication, it's not obvious that the SEC could do much other than issue a press release saying 'sorry, looks like our advice about this was wrong, Twitter turns out NOT to be an impartial information distribution channel, please stop assuming it is.' I wonder to what extent the existence of that SEC guidance affects how Twitter and Facebook behave? Do they consider, when deciding to implement features that modify the flow of postings from publisher to receiver, whether they are creating a mechanism which contravenes the SEC's understanding that they implement a 'fair disclosure' mechanism? Should they? Should there be regulatory compliance reasons that oblige them to? And, per the SEC's guidance, this also applies to "social media outlets like Facebook and Twitter", whatever that means. Baidu, maybe? Is TikTok a legitimate channel to release material information? Do TikTok's engineers know that? This world we've built... it's really weird.
- deleted 6y ago[deleted]
- Udik 6y agoI especially like the reply to Musk's tweet: "dude, I just lost $10k because of this tweet". So you've invested at least $100k on the highly volatile stock of a luxury car company, overpriced by any reasonable standard, in the middle of a world pandemic with half of the world in lockdown and a huge economic crisis looming. Headed by a brilliant but slightly deranged CEO with a passion for tweeting anything that passes through his head. I mean, you've been looking for it, didn't you? You wouldn't have complained if Musk had tweeted some bs about Teslas getting warp drive next years via OTA update.
- YokoZar 6y agoIt's more likely this particular trader was selling options on Tesla stock that were only relevant when the stock price moved dramatically.
- gameswithgo 6y agomaybe she bought the stock years ago
- imron 6y agoThen she didn't lose anything, and in fact has made quite a lot!
- mmm_grayons 6y agoIt looks like the guy who tweeted that is, by his own profile picture, clearly a man.
- bob33212 6y agoIf he doesn't like Elon or Tesla's board of directors, that is fine. Everyone is entitled to their opinion. But it is like buying a utility stock and then complaining that they are boring and slow to innovate. It may be valid criticism, but what did you think you were buying.
- xtreme 6y agoIt's far more likely that he held some options that became worthless due to the sudden drop in the stock price. I love Elon and his vision but tweeting that was irresponsible.
- hudon 6y agoDid Elon also cause AMZN stock to drop around the same time? And FB? And MSFT? And UBER? That’s a whole lot of clout, unless I’m misunderstanding something here...
- willio58 6y agoNo, and I don't believe the author claimed this.
- renewiltord 6y agoI believe GP's point is that this is coincidental broad dip, not TSLA dip though of course the downside with rhetorical questions like that is that you have to guesss at meaning.
- dirkgently 6y agoDid Amazon started dipping exactly after Musk's tweet? No. And you know it. Stop defending Elon's shitposting the shitstorm it caused.
- cjhopman 6y agoWTF, you're just spreading nonsense. Take a look at this image and see if you can tell just looking at it which of them is tsla and at what time musk commented: https://imgur.com/OwwKVyf https://imgur.com/OwwKVyf that includes every one of the stocks you mentioned and there is one clear outlier. No other stock has a clear change at that time, and the behavior of the one stock is clearly different than the rest. I do not doubt you could perform this same analysis limited to tech companies and get the same result (though comparing tesla to these tech companies is rather irrationally aspirational).
- hudon 6y agoYour chart tells me TSLA is a more volatile stock. Everyone knows TSLA is as volatile as a cryptocurrency. Why do you want to believe in god-like tweet powers so much?
- ranieuwe 6y ago"Of course, you probably shouldn’t believe these estimates since I didn’t generate them with neural net." The current status of "AI" summed up.
- bo1024 6y agoHa. But this approach seems really problematic since it's based on the assumption that algorithms are good at predicting the counterfactual, while the reality is that the stock market is by nature extremely unpredictable. Example 1: You could imagine the US gov announces a national quarantine, and Elon tweets this in response 1min later. The tweet didn't cause the stock drop, the quarantine did (a classic C caused both A and B problem). But this algorithm wouldn't know that. Example 2: Imagine a court case ruling against Tesla is announced, and Elon immediately tweets. Same issue, but harder to detect. In the quarantine case you could assume Elon doesn't influence stocks besides Tesla, and observe that all of them are crashing. Example 3: A really good earnings report for Tesla is announced, at the same time Musk tweets it's overpriced. The price cancels these out and stays steady. Now the algorithm gives a false negative, since actually the tweet prevented the price from going up.
- unwoundmouse 6y agoIn your case 1, doesnt the decorrelation from the index deactivate any effect that the gov quarentine would have?
- RhodesianHunter 6y agoThe algorithm isn't so much predicting anything here though, it's retroactively applying prices based on known correlations with the S&P 500.
- 6gvONxR4sf7o 6y agoThat's a prediction.
- tester89 6y agoFor Example 1, wouldn’t the entire S&P index fall, this showing Musk isn’t responsible,
- mrandish 6y agoI'm really, really hoping that Elon actually asked a securities attorney and found out that if he is not short any Tesla shares, that he can just tweet that without repercussions. I mostly hope this because I'd really like the option to die on Mars (by which I mean, of extreme old age in a comfortable bed in a luxuriously scenic habitat). Thus, I choose to believe that Elon's occasional manic episodes are just stress and sleep deprivation from obsessive overwork.
- cjhopman 6y agoAny serious analysis would find that the fate of Elon Musk has nothing to do with your likelihood of dying on Mars.
- drenvuk 6y agoThis is bad analysis. It's not even close to absolute. He's not accounting for the volatility of the stock. That's the reason that premiums on tsla options have been and are so incredibly high. He didn't even mention that the SPY is much less volatile over its entire history than TSLA individual stock considering it's an index of 500 large/mid cap stocks. Of course it's going to be less volatile. Did he tank it? Maybe, but every tech stock had a dip around 11am. If he tanked it then the sentiment analysis bots tracking his tweets need to be tweaked a bit.
- flyGuyOnTheSly 6y agoAMZN's dip [0] looks nothing like TSLA's [1] today though. Founders commenting on the valuation of their company is absolutely tradeable news to day traders. I would argue that this tweet directly affected TSLA tanking in price immediately after it landed. [0] https://www.google.com/search?client=firefox-b-e&q=amazon+stock+price https://www.google.com/search?client=firefox-b-e&q=amazon+st... [1] https://www.google.com/search?client=firefox-b-e&q=tesla+stock+price https://www.google.com/search?client=firefox-b-e&q=tesla+sto...
- AznHisoka 6y agoAMZN is an outlier today because they reported earnings last night. Better to compare it to an index.
- jimmySixDOF 6y ago... and also skewed by the WSJ article on unfair third-party seller treatment that contradicts previous house Judicial Committee testimony and may lead to new hearings... The problem with muddy water is it's muddy.
- flyGuyOnTheSly 6y agoThe DOW looks almost identical to AMZN.
- cuchoi 6y ago
- deleted 6y ago[deleted]
- jsw97 6y agoEvent studies have been around since the late 1960s.
- mcqueenjordan 6y agoThis doesn't actually prove anything, right? Isn't this a textbook case of how a confounding variable could explain the effect?[1] It's also a bit disingenuous to claim "before the tweet, Tesla stock prices are well-predicted by the S&P 500" -- anyone can take a quick glance at 1 or 5 year charts of SP500 vs TSLA and disabuse themselves of that notion quite quickly. [1]: https://en.wikipedia.org/wiki/Confounding https://en.wikipedia.org/wiki/Confounding
- pbourke 6y agoHow much whiskey is there in the world right now and how can we get it delivered to Tesla’s compliance department?
- birdyrooster 6y ago> How much whiskey is there in the world right now and how can we get it delivered to Tesla’s compliance department? Wishing alcoholism on our enemies now are we?
- pbourke 6y agoAlcoholism? Enemies? You got all that from a joke about how much stress Elon creates for his own people with his inanity?
- klyrs 6y agoNow I wanna see your topology assignment (not joking; it sounds like a fun way to procrastinate)
- S_A_P 6y agoSo from the "facts" Ive read on the internet, a reputable source, Musks girlfriend is mad at him. Maybe he has a self destructive streak. Maybe he is bored and wants a new problem to solve. Maybe he has substance abuse issues. That said, I dont know what compels people to tweet things that just end up complicating their lives. Twitter seems to be a helluva drug to some people. Maybe the fact that my dormant account has like 4 followers is a blessing...
- deleted 6y ago[deleted]
- rchaud 6y agoFor people like Musk, attention is the drug. Twitter is just the conduit.
- jasonlingx 6y agoWhatever Musk tweets, be it the stock price is too high or too low, doesn’t affect its true value one bit. OTOH, you can be pretty sure he’s doing everything he can to increase the value of Tesla though.
- rchaud 6y agoValue is whatever price a buyer will pay for something at the time of the transaction. There is no such thing as 'true value' in capital markets.
- mudil 6y agoElon downgrades the stock and market agrees with him. That's my analysis.