Why Stock Price Jumps? The Role of Disagreement and News

We empirically explore the role of investor disagreement and news for various types of stock jumps, where the dynamic of stock returns is captured by a contagion model. Our disagreement measure is derived from more than 173 million tweets from a social media investing platform, StockTwits, for about 3,000 publicly-traded companies. Consistent with theoretical disagreement models, we find that investor disagreement is significantly associated with jumps, including time-variation in estimated jump intensity and realized jump-size distributions. Jump features are also explained through news, however jump intensity explainability by investor disagreement is about four times higher than news. Furthermore, the relationship varies across different types (signed, contagious and non- contagious) of jumps. Our results imply that contagion is more likely when the level of disagreement is higher