"They Say So": Do True, False, Negative, and Positive Rumours Affect Stock Price in Different Ways?

In this thesis I examine the effect of rumours on stock prices by the means of event study methodology. The evidence offered by previous studies on the effect of rumours on stock prices and returns is mixed, thus the topic merits further investigation. One distinguishing characteristic of this study is that it examines different types of rumours (positive versus negative), as well as whether these rumours are true or false. Using a dataset that includes the rumours on 110 stocks and applying the event study methodology, I find no evidence of statistically significant changes in stock prices after the publication of rumours. Furthermore, I find that the type of rumours, whether positive or negative, and its nature, whether false or true, did not affect the observed results in terms of statistical significance.