Real returns from unreal world? Market reaction to Metaverse disclosures

In this study, we present a first attempt at measuring the market reaction to firms’ SEC disclosures related to Metaverse activity. We follow the existing literature in differentiating between disclosures associated with vague future intentions or plans to adopt Metaverse activity (“Vague”), and announcements concerning actual activities related to the Metaverse infrastructure (“Clear”). Clear disclosures are associated with higher abnormal returns, in contrast to Vague ones leading to a milder response by investors in the days surrounding the disclosure. Early adopters and large-cap firms earn higher abnormal returns immediately following Metaverse disclosures than do late adopters and small-cap companies. Although the Metaverse may represent a potential growth engine for firms in the future, we document a short-term positive overreaction in share price behavior that is completely reversed within the 30 days following the announcements, regardless of the size of companies, the timing of the disclosure, or whether the disclosure was Clear or Vague.