Abstract

http://ssrn.com/abstract=2234246
 
 

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Linguistic Diversity and Stock Trading Volume


Yen-Cheng Chang


Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University; China Academy of Financial Research (CAFR)

Harrison G. Hong


Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Larissa Tiedens


Stanford Graduate School of Business

Bin Zhao


Shanghai Advanced Institute of Finance; Shanghai Jiao Tong University (SJTU); China Academy of Financial Research (CAFR)

March 14, 2013

Rock Center for Corporate Governance at Stanford University Working Paper No. 134

Abstract:     
We test the hypothesis that the linguistic diversity of a stock’s investor base leads to more trading. Trading might be due to beliefs differing across languages or investor exposure to multiple languages leading to more trading ideas. Using stock message boards from China, which has ten languages, we measure the linguistic diversity of a stock’s investor base using a Herfindahl index of messages posted from different languages. A firm’s diversity increases in the number of languages spoken in the province where it is headquartered. Using the latter as the instrument, trading volume in a stock rises with its linguistic diversity. We then attempt to discriminate among competing mechanisms. We also show using a sample of forty-one countries that countries with more linguistic diversity have greater stock market turnover.

Number of Pages in PDF File: 61

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Date posted: March 16, 2013 ; Last revised: December 30, 2013

Suggested Citation

Chang, Yen-Cheng and Hong, Harrison G. and Tiedens, Larissa and Zhao, Bin, Linguistic Diversity and Stock Trading Volume (March 14, 2013). Rock Center for Corporate Governance at Stanford University Working Paper No. 134. Available at SSRN: http://ssrn.com/abstract=2234246 or http://dx.doi.org/10.2139/ssrn.2234246

Contact Information

Yen-Cheng Chang (Contact Author)
Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University ( email )
211 West Huaihai Road
Shanghai, 200030
China
China Academy of Financial Research (CAFR)
211 West Huaihai Road
Shanghai, 200030
China

Harrison G. Hong
Princeton University - Department of Economics ( email )
Princeton, NJ 08544-1021
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Larissa Tiedens
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States
Bin Zhao
Shanghai Advanced Institute of Finance ( email )
211 West Huaihai Road
Shanghai, 200030
China
Shanghai Jiao Tong University (SJTU) ( email )
KoGuan Law School
Shanghai 200030, Shanghai 200052
China
China Academy of Financial Research (CAFR) ( email )
1954 Huashan Road
Shanghai P.R.China, 200030
China
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