53 Pages Posted: 1 Jan 2014 Last revised: 20 Jan 2015
Date Written: January 19, 2015
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: 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