Language and Risk in Financial Markets

9 Pages Posted: 26 Jul 2022

See all articles by Jin Roc Lv

Jin Roc Lv

Australian National University (ANU)

Emma Schultz

Australian National University (ANU)

Charlotte Stump

Australian National University (ANU)

Date Written: July 6, 2022

Abstract

We take inspiration from the linguistic relativity hypothesis and investigate language as a driver of risk in financial markets. Specifically, we explore whether the strength of future-time reference (FTR) in a language affects the risk of investing in stocks in companies doing business in the language. We exploit the multilingualism in Belgium to provide important evidence: While all public firms are subject to the same country-level capital market laws, only a fraction are located in a region where a strong-FTR language is used. Using regression analysis to compare the risk of stocks in firms headquartered in strong- versus weak-FTR language regions, we find that FTR has a negative effect on stock risk, providing empirical support for linguistic relativity in naturally occurring behaviors.

Keywords: Linguistic relativity hypothesis; future-time reference; financial risk

JEL Classification: G12

Suggested Citation

Lv, Jin Roc and Schultz, Emma and Stump, Charlotte, Language and Risk in Financial Markets (July 6, 2022). Available at SSRN: https://ssrn.com/abstract=4154977 or http://dx.doi.org/10.2139/ssrn.4154977

Jin Roc Lv (Contact Author)

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Emma Schultz

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Charlotte Stump

Australian National University (ANU)

Canberra, Australian Capital Territory 2601
Australia

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

Paper statistics

Downloads
80
Abstract Views
431
Rank
551,501
PlumX Metrics