The effects of rumours on financial market efficiency

Abstract

During the last decade the world has faced a tremendous development of information technology and telecommunication. This study investigates the impact of rumours (released on the web) on common stock returns. The findings indicate that the market responds positively to rumours. During the event day and the five preceding days, the abnormal stock return is positive and statistically significant. In particular, the impact is stronger for single than for multi-rumours, for initial rather than subsequent rumours and for realized rumours than for nonrealized rumours.