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

70 Pages Posted: 11 Jul 2019 Last revised: 27 Apr 2021

See all articles by Hui-Ching Chuang

Hui-Ching Chuang

Yuan Ze University - College of Management

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

YinSiang Huang

Fuzhou University of International Studies and Trade

Chih-Yung Lin

National Yang Ming 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). Pacific-Basin Finance Journal, Forthcoming, 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 ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

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 Yang Ming Chiao Tung University ( email )

National chiao tung university, 1001 university ro
Hsinchu, 1001
Taiwan

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