In a study of 186 Tesla-related bot accounts, Kirsch and Chowdhury found that the stock price increased by nearly 2% after each account was started. Then they calculated the average weekly return using stock returns from the week before and the week after the bot developed.
Over the years, Tesla’s market value has increased, but its price has fluctuated dramatically. Chowdhury added that trading was much more erratic outside of those times when it was all about bot training.
The news for Tesla (NASDAQ:TSLA) was not good in November 2013. Several publications reported cases where Tesla Model S cars caught fire. That caused the electric carmaker’s stock price to plummet.
For 75 minutes on Nov. 7, eight automated Twitter accounts began posting positive things about Tesla. They will tweet over 30,000 times over the next seven years.
That’s a drop in the bucket considering the daily volume of tweets, which exceeds 500 million. However, one of Robert H. Smith School of Business associate professors, David A. Kirsch, determined that “bot activity” had a substantial influence on the “stock of the future” narrative that propelled Tesla’s market valuation to greater heights than traditional financial research could.
The co-author of “Bubbles & Crashes: The Boom and Bust of Technological Innovation”. The “glamorous storytelling” is more profitable than financial research in today’s market. That said, “Tesla’s narrative has been intriguing,” added Kirsch.
Despite numerous bankruptcy attempts, Elon Musk’s vision of a dominant corporate company and savior of the world allowed him to “continue selling stock to the public to maintain his power” despite many failures. Eventually, it becomes self-fulfilling.
Kirsch and Moshen Chowdhury are investigating whether Twitter bots are being used to affect stock trading. The investigation comes after Musk openly declared his intention to use his money and massive Twitter following to influence the network’s future course.
Musk had previously stated that he would join the board after buying nearly 10% of Twitter. However, Twitter reported on Monday that Musk had changed his mind. On Twitter, Elon Musk is a sensation. He frequently posts tweets to his 80 million followers, ranging from average to absurd, childish to vulgar.
When a Twitter account is designed to search for specific posts or news, such as Musk’s headquarters, and then tweet the appropriate responses, it is known as a “bot”. Chowdhury and Kirsch examined Tesla-related tweets from 2010 to 2020 (the year the company went public).
Ten percent of the 1.4 million tweets sent by the top 400 accounts using the $TSLA hashtag over ten years were generated by bots. According to the study, 23% of the 157,000 tweets with the hashtag #TSLA were generated by automated accounts.
While the association doesn’t seem random, “this is not a causal relationship,” added Kirsch. “We’re trying to figure out how things work.” A flurry of tweets alone cannot boost the stock. They must be noticed, interpreted, and then executed.”
They are also looking at the timing of tweets and stock market options activity, among other things. Another uncertainty is whether the bots are the work of organizations with a financial stake in Tesla.
Experts say other organizations have produced many bots on Twitter, but their content tends to be “generic” commercial messages.
There’s no way it affects the stock market, Kirsch argued, “computerized advertising” is a new kind of corporate content dissemination.”
