How well do markets respond to newly released information on social media?

Closed-door decisions can be defined as decisions in which the outcome is determined by a limited number of decision-makers and is shrouded in at least some secrecy. An example of a closed-door decision-making process is the US Supreme Court, which can be contrasted with open-door decisions, such as national elections, which are populated by a large number of independent decision-makers.  In this paper, we use two well-documented cases of high-profile elections to examine, using a large real-time data set, how well market prices respond to newly released information via social media relating to both types of decision. We use the 2013 Vatican conclave as an example of a closed-door decision and contrast this with the UK election of 2010, because we have extensive data sets of market indicators relating to each, as well as records of micro-blogging posts on Twitter relating to breaking news developments in each. Our results suggest that the market was generally sluggish in responding to new information in both contexts, and notably so in the former case. We venture some possible explanations for our findings, including the observation that market prices do not fully react to the release of new information via social media until that information is picked up and disseminated by traditional media. We explain this by the demand by market actors for corroborating evidence in established and well-regarded news outlets, particularly in respect of events shrouded in more secrecy. We explore whether this sequential reaction of markets is an efficient response to the release and dissemination of the new information, and conclude that there is at least some evidence of informational inefficiency.