Does Diversity Lead to Diverse Opinions? Evidence from Languages and Stock Markets
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)
Stanford Graduate School of Business
Hofstra University - Frank G. Zarb School of Business
Shanghai Advanced Institute of Finance; Shanghai Jiao Tong University (SJTU); China Academy of Financial Research (CAFR)
June 15, 2014
Rock Center for Corporate Governance at Stanford University Working Paper No. 168
Stanford University Graduate School of Business Research Paper No. 13-16
Diversity, whether ethnic, religious or linguistic, is often thought to stimulate diverse opinions and activity. We test whether this is the case using linguistic measures of diversity across Chinese provinces and cities and stock market measures of the diversity of opinions and trading activity. Using the geographical isolation of an area due to hilly terrain as an instrument for linguistic diversity, we find that households living in more diverse areas indeed have more diverse opinions as measured by greater disagreement on stock message boards and are also more active stock traders. We then discriminate in favor of a diversity-stimulates explanation for our findings and against the diversity-separates view of slow news diffusion due to language barriers.
Number of Pages in PDF File: 49working papers series
Date posted: January 1, 2014 ; Last revised: June 19, 2014
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