Does Diversity Lead to Diverse Opinions? Evidence from Languages and Stock Markets

53 Pages Posted: 1 Jan 2014 Last revised: 24 Aug 2023

See all articles by Yen-Cheng Chang

Yen-Cheng Chang

National Taiwan University - Department of Finance; National Taiwan University - Center for Research in Econometric Theory and Applications

Harrison G. Hong

Columbia University, Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Larissa Tiedens

Stanford Graduate School of Business

Na Wang

Hofstra University - Frank G. Zarb School of Business

Bin Zhao

Thammasat Business School

Date Written: January 19, 2015

Abstract

Diversity of opinions among investors plays a crucial role in models of financial market speculation and bubbles. Yet, little is known about the origins of investor disagreement. Using unique data from China, we identify an important cultural and linguistic factor. We show that investors living in linguistically diverse areas express more diverse opinions on stock message boards and trade stocks more actively. We use geographical isolation of an area due to hilly terrain as an instrument for linguistic diversity. We then discriminate in favor of a differential interpretations mechanism and against slow news diffusion due to language barriers.

Suggested Citation

Chang, Yen-Cheng and Hong, Harrison G. and Tiedens, Larissa and Wang, Na and Zhao, Bin, Does Diversity Lead to Diverse Opinions? Evidence from Languages and Stock Markets (January 19, 2015). Rock Center for Corporate Governance at Stanford University Working Paper No. 168, Stanford University Graduate School of Business Research Paper No. 13-16, Available at SSRN: https://ssrn.com/abstract=2373097 or http://dx.doi.org/10.2139/ssrn.2373097

Yen-Cheng Chang (Contact Author)

National Taiwan University - Department of Finance ( email )

1, Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

National Taiwan University - Center for Research in Econometric Theory and Applications ( email )

1, Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

Harrison G. Hong

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Larissa Tiedens

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Na Wang

Hofstra University - Frank G. Zarb School of Business ( email )

134 Hofstra University
Hempstead, NY 11549
United States

Bin Zhao

Thammasat Business School ( email )

2 Prachan Road
Pra Nakorn
Bangkok, Bangkok 10200
Thailand

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
1,032
Abstract Views
7,359
Rank
40,160
PlumX Metrics