The metaverse and stock price: a short-term event analysis on the impact of metaverse announcements on stock prices

Abstract

This master’s thesis aimed to explore the intricate relationships between stock price fluctuations and the issuance of Metaverse-related announcements by companies to understand investor sentiment toward this futuristic concept still in its early stages of development. To achieve this, the short-term event analysis and the market model were employed to examine the impact on the stock market resulting from the release of 58 Metaverse-related announcements published between January 1st, 2014, and September 30th, 2023, from 40 companies listed on the American stock exchanges NYSE and NASDAQ. The findings demonstrated that these announcements generate a statistically significant positive impact on the issuer company's stock on the day of publication. Subsequently, a cross-sectional regression model was constructed to identify factors influencing the abnormal returns of the stock during the observation period, spanning three days before and three days after the announcement's publication. The model considers seven potential factors related to the announcement content, company-specific characteristics, and timing of the publication. The results indicate that announcements presenting more generic and long-term investment projects were more likely to produce short-term positive abnormal returns compared to those involving clearer and more specific investments. Moreover, announcements concerning extraordinary corporate transactions, such as acquisitions, mergers, or partnership agreements for the creation or development of the Metaverse, had a negative impact on Cumulative Abnormal Returns in the short term. Regarding the characteristics of the examined companies, the study demonstrates that investor sentiment tends to be more positive when Metaverse-related announcements are issued by companies operating in the technology sector. Although less robust, it can be also inferred that generally, larger and better-known companies have a higher likelihood of generating higher abnormal returns. Lastly, the timing of the announcement publication is another factor that positively influences short-term returns. In other words, the Cumulative Abnormal Returns (CARs) observed during the event window are generally more positive if the publication date aligns with a similarly positive market moment.