
A synthetic control causal analysis of Musk's tweet on Tesla stock price - alexpghayes
https://www.alexpghayes.com/blog/elon-musk-send-tweet/
======
ve55
Despite 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.

~~~
clairity
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.

~~~
maest
First 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
1) 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.

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bo1024
Ha. 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.

~~~
RhodesianHunter
The algorithm isn't so much predicting anything here though, it's
retroactively applying prices based on known correlations with the S&P 500.

~~~
6gvONxR4sf7o
That's a prediction.

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drenvuk
This 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
AMZN'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+st...](https://www.google.com/search?client=firefox-
b-e&q=amazon+stock+price)

[1] [https://www.google.com/search?client=firefox-
b-e&q=tesla+sto...](https://www.google.com/search?client=firefox-
b-e&q=tesla+stock+price)

~~~
AznHisoka
AMZN is an outlier today because they reported earnings last night. Better to
compare it to an index.

~~~
jimmySixDOF
... 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.

------
odnes
Does anyone know if Twitter are allowed to legally frontrun the markets before
making tweets publicly visible?

~~~
jameshart
It's not immediately clear to me that they can't.

Twitter makes NO guarantees that they will deliver every tweet to all
consumers simultaneously, or even at all. They don't guarantee they won't hold
the tweet up while they decide how to process it - they certainly analyze
tweets for content and automatically hold some for manual review, for example.
So why on earth couldn't they accept the tweet, process the information in it,
and make corporate decisions about how to, say, adjust their investment
portfolio... before they put the tweet's contents out on the wire for the
world? Is there anything in the ToS that says they _can 't_ act on the
contents of tweets you send them? You shared the information with Twitter with
the intent of publishing it to your followers - but the agent you handed the
information to first was Twitter.

There's a sci-fi black mirror kind of scenario in there, too... It's quite
possible that if the president of the US were to declare war, the first place
that information would reach outside the White House and Pentagon would be a
Twitter HTTP service.

Think about the responsibility the software that has to handle, route, and
process that request bears. Think about the _threat model_ the systems that
software is part of need to consider, if that really is potentially one way it
could be used.

Worse still, it might not even be the 'send tweet' handler that gets notice
first; the twitter client into which the message is being typed, sending back
analytic data to help optimize its autocomplete suggestions or pushing data to
the server so it will be ready to offer an appropriate gif to accompany the
tweet, might be sending back the draft text of the announcement before the
president hits 'Send'.

So here's your story writing prompt:

A Twitter engineer reviewing logs trying to track down a bug in the gif
autosuggest algorithm chances across a series of requests from the president's
iPhone in the last two minutes, containing text from a tweet being composed,
that look for all the world like the drafting and redrafting of an
announcement that the country is at war...

What does Twitter do?

~~~
arthurcolle
Block the tweet? It's like the USSR guy who decided that the early warning
signal was incorrect, and prevented WW3.

This idea of unilateral "freedom of speech" is beyond goofy - some actions
that deliberately cause massive amounts of distress, even in the short-term,
must be attenuated in some manner.

~~~
gpm
If Trump announces the US is at war, for most purposes in the short term
(until congress steps in to assert their power) the US is at war. It is not a
false alarm.

If twitter had some reason to believe that the tweet was a false alarm about
going to war, and not an official announcement by the US military's commander
in chief, that might be a reasonable to take. Perhaps if they also believed
the account had been hacked or that a staffer had been duped into thinking
that they were supposed to announce a war when they weren't. That's not the
hypothetical situation here though.

~~~
jameshart
Sounds like a good cliffhanger leading into the third act, though.... :)

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hudon
Did 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...

~~~
cjhopman
WTF, 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
Your 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
"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.

------
Udik
I 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.

~~~
gameswithgo
maybe she bought the stock years ago

~~~
imron
Then she didn't lose anything, and in fact has made quite a lot!

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mcqueenjordan
This 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)

------
S_A_P
So 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...

~~~
rchaud
For people like Musk, attention is the drug. Twitter is just the conduit.

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klyrs
Now I wanna see your topology assignment

(not joking; it sounds like a fun way to procrastinate)

------
jsw97
Event studies have been around since the late 1960s.

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mudil
Elon downgrades the stock and market agrees with him. That's my analysis.

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jasonlingx
Whatever 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
Value 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.

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pbourke
How much whiskey is there in the world right now and how can we get it
delivered to Tesla’s compliance department?

~~~
birdyrooster
> 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
Alcoholism? Enemies? You got all that from a joke about how much stress Elon
creates for his own people with his inanity?

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mrandish
I'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
Any serious analysis would find that the fate of Elon Musk has nothing to do
with your likelihood of dying on Mars.

