The Effect of Language on Investing: Evidence from Searches in Chinese Versus English

65 Pages Posted: 11 Jul 2019

See all articles by Hui-Ching Chuang

Hui-Ching Chuang

Yuan Ze University - College of Management

Iftekhar Hasan

Fordham University - Gabelli School of Business; Bank of Finland

YinSiang Huang

Fuzhou University of International Studies and Trade

Chih-Yung Lin

National Chiao-Tung University

Date Written: March 1, 2019

Abstract

This study examines the language effect on investing using the Google search records of Chinese- versus English-speaking searchers. First, we find that the attention of Chinese speakers induces that of English speakers, increases abnormal news coverage, and has better predictability on stock returns. Second, Chinese searchers react faster to the shock of news events than those who search in English possibly because of a time lag for translation. Third, Chinese attention can reduce the price drift of earning surprises, whereas English attention cannot do so. Last, evidence shows that the firm-level information asymmetry is the channel of the local advantage. Therefore, our results suggest that investors using their local official language have a home advantage to find more profitable investment opportunities.

Keywords: investor attention, local advantage, return prediction, earning surprise, information asymmetry

JEL Classification: G11, G12, G14, G17

Suggested Citation

Chuang, Hui-Ching and Hasan, Iftekhar and Huang, YinSiang and Lin, Chih-Yung, The Effect of Language on Investing: Evidence from Searches in Chinese Versus English (March 1, 2019). Available at SSRN: https://ssrn.com/abstract=3416002 or http://dx.doi.org/10.2139/ssrn.3416002

Hui-Ching Chuang

Yuan Ze University - College of Management ( email )

135, Yuan-Tung Rd.
Taoyuan, 320
Taiwan
886-972-735-021 (Phone)

Iftekhar Hasan

Fordham University - Gabelli School of Business ( email )

Rose Hill Campus Bronx
New York, NY 10458
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

YinSiang Huang

Fuzhou University of International Studies and Trade ( email )

No.28,Yuhuan Road,Shouzhan New District,Changle
Fuzhou City, Fujian Province 350202
China

Chih-Yung Lin (Contact Author)

National Chiao-Tung University ( email )

Taiwan

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